Wednesday, 5 June 2013

The ANZ's latest Business Outlook

I was waxing lyrical yesterday about the great utility of the longer-running business opinion surveys to anyone   interested in getting an up to date feel for what's happening in the economy and what lies around the corner in coming months.

As it happens the ANZ's latest Business Outlook survey (for May) came out as I was writing, and it was essentially good news all round. Some of the (seasonally adjusted) measures dropped a little compared to April, but that doesn't matter - the overarching picture is a good one, as you can see for yourself if you follow the link. Firms' expectations for their own activity levels - the key indicator - were high across all the sectors of the economy; firms are planning on investing (farmers were especially on building up the livestock herds) and on hiring; and profitability is good. Exporting is okay rather than brilliant - understandable, given the high Kiwi dollar, the so-so state of the Australian economy, and the weakness of the Eurozone - and inflation is under control. Firms aren't planning on big jack-ups too their own prices, and they aren't expecting inflation elsewhere in the economy, either.

That said, businesses also believe that, while there isn't much of an inflation issue, the Reserve Bank's next move will be to raise interest rates, and they're very likely right. It's probably not going to be a big move, though. The financial futures market, which essentially makes forecasts of where the 90 day bank bill rate is going to go, expects the 90 day rate (2.64% at the moment) to be just over 3% in a year's time, which would be consistent with one, maybe two, 0.25% increases in the Bank's official cash rate over the next year.

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