Latest / Best of Business / Christina Leung: NZIER deputy chief executive on the latest Quarterly Survey of Business Opinion indicating confidence has returned to sector

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Christina Leung: NZIER deputy chief executive on the latest Quarterly Survey of Business Opinion indicating confidence has returned to sector · Best of Business

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  Speaker 1: You're listening to a podcast from newstalks'd be follow this
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  Speaker 2: And signs of optimism among New Zealand's retail sector. The
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  Speaker 2: latest Ensedier quarterly survey of business opinion shows owners are
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  Speaker 2: less pessimistic about the economic outlook, so now sits at
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  Speaker 2: just five percent five percent expecting deterioration in our economic
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  Speaker 2: conditions compared to forty percent three months ago. So that's
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  Speaker 2: a thirty five percentage point turnaround. Insediar says the results
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  Speaker 2: could make a case for another official cash rate cut
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  Speaker 2: next week. Christina Jung is the Ensediar deputychef Executive and
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  Speaker 2: is with us this evening. Good evening, Kyoda. Hey, we'll
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  Speaker 2: get onto the sentiment data in a couple of minutes,
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  Speaker 2: because I know that'll come as good news to a
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  Speaker 2: lot of firms out there. But let's start off with
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  Speaker 2: the latest trading data. What do your numbers say about
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  Speaker 2: demand over the last quarter?
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  Speaker 3: So our latest enda are quarterly serve our business opinion
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  Speaker 3: does show that demand in the tuber quarter remained weak,
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  Speaker 3: with a net thirty one percent of firms reporting that
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  Speaker 3: they face reduced activity in the September.
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  Speaker 2: Quarter, right, okay, and how is that likely to change
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  Speaker 2: over the next three months.
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  Speaker 3: When we look at expectations for in the next quarter. Though,
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  Speaker 3: even though right here, right now, across a wide range
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  Speaker 3: of measures, firms are reporting quite weak demand in the
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  Speaker 3: September quarter, expectations for the next quarter are looking more positive.
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  Speaker 3: And that's particularly for the case for sectors such as
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  Speaker 3: retail and services, to the extent that these are the
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  Speaker 3: sectors that are more exposed to the household sector, we
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  Speaker 3: see the impact of law interest rates as having more
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  Speaker 3: of a positive impact on these areas.
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  Speaker 2: Yeah, I mean, that's that is a remarkable shift. So
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  Speaker 2: you've gone from well a net thirty one percent of
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  Speaker 2: firms reporting a decline in activity in the in the
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  Speaker 2: quarter to September, but two percent of firms are expecting
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  Speaker 2: weaker activity in the next quarter. So you know that
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  Speaker 2: that is a massive shift. And what that ninety five
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  Speaker 2: percent of that is down to the ocr.
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  Speaker 3: While we don't dwelve into US firms the reasons for
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  Speaker 3: how they're expecting or feeling the way they do. What
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  Speaker 3: we have seen also over the quarter is that when
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  Speaker 3: we are firms, particularly we have financial services firms, their
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  Speaker 3: expectations for interest rates. An overwhelming majority of firms are
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  Speaker 3: expecting more interest rates for the coming year, and the
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  Speaker 3: fact that we're seeing this recovery in sentiment most apparent
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  Speaker 3: in the retail and services sector, it does suggest that
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  Speaker 3: the impact of interest rates are having more of an
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  Speaker 3: immediate impact on these the house sector, for which these
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  Speaker 3: sectors tend to be more.
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  Speaker 2: Exposed, right, so what sectors are less exposed to the
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  Speaker 2: household sector than it and perhaps feeling a bit more
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  Speaker 2: downbeat or pessimistic.
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  Speaker 3: So we do see the building sector and also the
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  Speaker 3: manufacturing sector remains fairly down by for the building sector,
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  Speaker 3: that reflects the fact that constructions is still pretty weak.
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  Speaker 3: And also when we ask architects what their expectations are
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  Speaker 3: for construction work based on work in their own office,
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  Speaker 3: we can see that the pipeline across our housing, commercial
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  Speaker 3: and government construction work a week for the coming year.
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  Speaker 3: There are signs of an improvement beyond the coming twelve months. Though,
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  Speaker 3: when we ask architects in two years time what they're
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  Speaker 3: expecting in terms of that pipeline of construction work, there's
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  Speaker 3: actually an improvement. Expectations of improvement for housing and commercial construction.
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  Speaker 2: Okay, is that just down to the lag in the
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  Speaker 2: monetary policy cycle. You know, basically it takes the time
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  Speaker 2: for the full weight of those interstrate cuts to be
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  Speaker 2: felt across the economy.
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  Speaker 3: We would say part of that is the reason. Also,
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  Speaker 3: for example, if we look at the fact that we're
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  Speaker 3: firms asking them about hiring and investment intentions, despite the
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  Speaker 3: fact that their firms are expecting demand to pick up
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  Speaker 3: in the next quarter. When we ask them about their
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  Speaker 3: intentions expansion plans for example, and investment there they we
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  Speaker 3: can see that firms remain quite cautious. For example, a
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  Speaker 3: quarter of firms are expecting to reduce investment in buildings
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  Speaker 3: over the coming year. So that does suggest that while
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  Speaker 3: there is that expectations or hope for optimism that things
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  Speaker 3: will improve in the next quarter when it comes to
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  Speaker 3: actually putting in place expansion plans. Until that our firms
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  Speaker 3: are feeling more conviction of a sustained improvement in demand,
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  Speaker 3: we do expect that that caution towards hiring an investment
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  Speaker 3: will remain.
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  Speaker 2: So go back to that headline figure, net five percent
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  Speaker 2: of firms expected deterioration in general economic conditions over the
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  Speaker 2: coming months. Compare that though the net forty percent from
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  Speaker 2: the June quarter. What does this mean for the OCART
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  Speaker 2: decision next week?
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  Speaker 3: So in terms of the reboild we can in terms
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  Speaker 3: of that recovery of business confidence, it is looking quite
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  Speaker 3: a more positive picture for the news and economy. Also,
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  Speaker 3: the fact that in this latest end are call less
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  Speaker 3: you've got business opinion. We're seeing a continue easing and
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  Speaker 3: inflation indicators, and that's particularly the case when it comes
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  Speaker 3: to pricing pressures. That's driven by the fact that in
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  Speaker 3: this week demand environment booms in the manufacturing, building and
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  Speaker 3: retail sectors report that they cut prices in the September quarter,
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  Speaker 3: with the Reserve Bank highlighting that the change in price
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  Speaker 3: setting behavior was one of the factors that provided them
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  Speaker 3: with the comfort to start the easing cycle. We do
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  Speaker 3: see this overall picture cautious optimism, but in an easing
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  Speaker 3: inflation environment, as supporting the case for further OCR cuts.
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  Speaker 2: Yeah, twenty five or fifty. What do you reckon, Christina?
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  Speaker 3: I've been asked that a lot, and I would say,
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  Speaker 3: based on today's results, you could argue the case for
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  Speaker 3: eager move. Really, certainly it's encouraging to see that continue
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  Speaker 3: decline in inflation indicated we are expecting a twenty five
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  Speaker 3: basis point de client at the upcoming meeting, and that
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  Speaker 3: more reflects the fact that just with the commencement of
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  Speaker 3: the easing cycle that was just seen in August, we're
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  Speaker 3: already seeing such a rebound in expectations. We feel it's
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  Speaker 3: prodent to be a more measured in the easing cycle
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  Speaker 3: in order to be able to assess the impact of
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  Speaker 3: the moves that it's done today.
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  Speaker 2: Yeah right, that makes sense. Hey, thank you so much.
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  Speaker 2: Christina really appreciated that. As Christina Lung, who is the
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  Speaker 2: Deputy Chief Executive of the enzed AA, speaking of optimism
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  Speaker 2: in the retail sector in Australia, that there's real reason
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  Speaker 2: for optimism. So retail sales have actually rebounded up almost
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  Speaker 2: a percent compared to expectations, almost double expectations, which and
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  Speaker 2: it's over there actually just putting down to the weather
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  Speaker 2: they reckon it's been so warm throughout August and Australia
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  Speaker 2: that actually retail sales have been almost twice as good,
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  Speaker 2: or the growth in retail sales has been almost twice
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  Speaker 2: as good as they had been anticipating. So we're going
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  Speaker 2: to catch up with Paul Block from HSBC before seven o'clock.
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  Speaker 2: Yet his thoughts on that one, says Jack, the final
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  Speaker 2: quarter of the year for US retailers is historically cyclically high.
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  Speaker 2: That makes a lot of sense heading into Christmas and
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  Speaker 2: the holidays. What we're after is the standard annual cycle
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  Speaker 2: to be a positive boost augmented by interest rate cuts
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  Speaker 2: to give us a macroeconomic acceleration and get us rolling
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  Speaker 2: into twenty twenty five. Yeah, obviously a lot riding on
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  Speaker 2: that call next week. Well, I think it's the second
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  Speaker 2: to last call for the Reserve Bank for this year.
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  Speaker 2: Twenty five or fifty basis points seem to be the
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  Speaker 2: pick between most economists. I think the majority at the
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  Speaker 2: moment probably picking twenty five, but still a bit of
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  Speaker 2: data to come out before that decision is final. Right now,
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  Speaker 2: it's quarter past sixty with Jack Tame. This is News
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