But the pieces were in place for a cyclical recovery, Zollner said.
“Though we are expecting growth to be modest, recovery takes time. It shouldn’t be forgotten that the slowdown in recent years, while painful, has achieved a lot in terms of clearing the decks for the next upswing.”
Real house prices had unwound from the Covid stimulus bubble, household and business debt were lower than pre-Covid as a share of GDP, inflation had been beaten down and external balance with the rest of the world had been restored as imports reduced and exports grew, Zollner said.
“The pick-up in retail sentiment underlines that as the weather warms, the economy is set to do the same, with significant monetary easing working its way through and high rural incomes supporting activity and confidence in the regions.”
Inflation indicators were stable: the net percentage of firms expecting to raise prices in the next three months eased from 46% to 44%, while those expecting cost increases rose one point to 76%.
ANZ chief economist Sharon Zollner. Photo / Corey Fleming
One-year-ahead inflation expectations were little changed at 2.75%.
The data showed that retail, construction and services drove the lift in confidence.
Manufacturing slipped and agriculture became more circumspect.
But in nominal terms, construction remained the laggard, Zollner said.
“The sharp drop in employment in this sector compared to a year ago raises questions about whether these workers will still be available to rehire when the next upswing comes.”
Agriculture remained the most upbeat sector overall.
In the regional breakdown, Canterbury remained the standout, while Wellington continued to lag.
Based on the timing of responses, it was not obvious that the Reserve Bank’s 50-basis-point interest rate cut (on October 8) had boosted confidence, Zollner said.
“But we’d caution that there has been a pattern for the past five months of early responders being predominantly more positive than late-month ones, so one needs to be cautious about ascribing the difference to mid-month events.”
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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