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“The message from the  Business Outlook survey continues to be that the business  is improving but isn’t easy,” says  chief economist Sharon Zollner.

“Firms remain confident that better times  and are positioning themselves to take advantage of that as best they can, but many remain hampered by poor cashflow.”

The ANZ Business Outlook survey for March showed topline confidence was flat at +58.

But firms’ expected own activity rose four points to +49.

“Like last month, activity indicators saw a mix of rises and falls in March but overall continue to portray a gradually recovering economy,” Zollner said.

“Reported past activity (the best indicator of GDP) lifted four points. At a net +1, it’s certainly not strong, but the improvement has been broad-based.

Past employment lifted one point to -6.

Pricing and cost indicators rose, both up three to four points to the highest in a year or more. One-year-ahead inflation expectations rose 0.1% pts to 2.6%.

“The lift in inflation indicators is becoming a little disconcerting,” Zollner said.

“We are highly conscious that we downplayed the message from this indicator in 2021 when it provided a timely warning of an imminent dramatic rise in inflation.

“However, the economy was in a very different place then – resources (both people and goods) were rapidly becoming scarce all over the economy.”

The re-emergence of inflation pressure now was much more likely to reflect raw material prices, energy prices and the weaker currency, Zollner said.

“That’s not comfortable for firms, but it’s much less likely to become persistent.

Still, the headline starting point for inflation, whatever its cause, would influence the RBNZ’s [Reserve Bank] enthusiasm for continued cuts in the Official Cash Rate,” she said.

“A cut next month looks assured and a follow-up in May looks highly likely, but a third in July is more of a coin toss at this stage.”

Against a backdrop of increasing global volatility, market pricing of future cuts was likely to continue to wax and wane, Zollner said.

This month, ANZ added a question about what was driving investment decisions to test out the RBNZ’s assumption that uncertainty about tariffs and geopolitics would be dampening investment.

Only about 3% of respondents explicitly called it out, but it may have been a part of the thinking of those who chose the domestic or global economic outlooks as factors, Zollner said.

This month’s survey also asked firms to rank their biggest problems.

Inflationary problems (difficulty finding skilled labour, high rates of pay, and other costs) were generally steady to smaller, Zollner said.

“The disinflationary problems of competition and low turnover remain dominant while interest rates continue to decline as a problem.”

“The exchange rate is bugging retailers and to a lesser extent manufacturers, presumably because of its impact on import prices, but barely registers elsewhere.”

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. To sign up for his weekly newsletter, click on your user profile at and select “My newsletters”. For a step-by-step guide,.