NEW ZEALAND: ANZ Survey Signals Soft Q1 But Likely Recovery Over 2025

ANZ February business confidence improved 4 points to 58.4, while the activity outlook was slightly lower at 45.1 after 45.8. The Q1 average of both measures though is below Q4 signalling a more cautious view on the economy going forward. In line with this, past own activity fell 3 points to -3, which ANZ notes is the best indicator of GDP. The RBNZ signalled this month that consecutive 25bp rate cuts are likely in April and May.

• Price and cost measures had ticked up in January. In February, cost & wage expectations eased and inflation expectations a year ahead moderated 0.2pp to 2.5%, but pricing intentions rose for the third straight month to their highest since April. The RBNZ noted that the weaker NZD was adding to inflation volatility. 

NZ ANZ business price/cost components

• ANZ notes that manufacturers are saying that higher electricity prices are adding to cost pressures and that the weaker currency is also likely contributing to this.
• Past employment was little changed at -7.4, suggesting that Q1 jobs data is likely to stay soft. With employment intentions improving to 17.0, its highest since August 2021, the labour market should recover over 2025. The RBNZ expects the unemployment rate to decline to 4.9% by year end.
• Profit expectations were little changed, while investment intentions rose 3.5 points to 18.1. Export intentions were 2 points higher at 17.9. These indicators are consistent with a gradual recovery in the economy.

NZ growth outlook