ANZ chief economist says time will tell whether the impact of the global tariff turmoil is lasting

Early signs are that the global turmoil sparked by the US tariff announcements early this month has had a marked impact on the business community, the latest ANZ Business Outlook Survey has found.

The April survey included responses that were mostly completed before the April 3 (New Zealand time) tariff announcement, but with some after. And there was a marked difference with the ones received after.

"The latter sample is smaller and therefore subject to more statistical noise and volatility, and we would take it as a directional signal rather than taking the numbers as gospel," ANZ chief economist Sharon Zollner said.

"However, the data does support the idea that the turmoil has had a marked negative impact on most forward-looking indicators, and particularly on headline business confidence and businesses’ plans to invest," she said.

"Time will tell whether the impact is lasting."

Zollner noted that the ANZ economists had recently revised down their forecast for growth and the Official Cash Rate, "partly because some of the high-frequency data has started to stutter a little, but also because we suspected that the uncertainty around the global outlook and broader policy moves by the US administration would lead some firms to put their investment and employment plans back on the shelf".

"This month’s survey results suggest that could well be the case. But we’ll have to wait and see whether the impact is short-lived or lasting.

"That in itself will depend not least on whether trade spats de-escalate or worsen from here."

In terms of the overall results (and this includes responses received both before and after the tariff announcement), business confidence fell 9 points to +49 in April, while expected own activity fell 1 point to 48.

"More positively, past own activity jumped 10 points to 11, while past employment jumped 8 points to 2," Zollner said.

She said that activity indicators overall continue to tell a tale of an economy that’s recovering.

"Most forward-looking activity indicators were lower in the late-month responses."

Zollner said pricing and cost indicators indicate margin squeeze from ongoing cost pressures. One-year-ahead inflation expectations were little changed at 2.65%.

"Looking at the detail, firms on average expect costs to rise 2.7% over the next three months, while they expect to raise prices by just 1.8% over the same period," Zollner said.

"That indicates margin squeeze – a long-running theme – amidst persistent cost pressures."