’Weak’ economy lowers inflation, RBI expects – Economist

ANZ chief economist Sharon Zollner said the economy was „clearly as weak as the Reserve Bank wanted”.
Photo: 123rf

Business confidence fell for the fifth month in a row, but firms’ pricing intentions continued to ease.

ANZ’s latest Business Outlook Survey They fell five points to a net 6 percent in June, while their own activity outlook weakened but remained unchanged.

In welcome news in the fight against inflation, price targets eased and inflation expectations also eased from 3.6 percent to 3.5 percent.

The previous survey showed consumers’ inflation expectations were rising, but ANZ said the trend was still subdued.

ANZ chief economist Sharon Zollner said the economy was „clearly weak” as the Reserve Bank (RBNZ) tried to reduce demand in order to reduce inflation.

„Both spending expectations and pricing intentions have now fallen from the plateau they were stuck in for eight to nine months. Inflation expectations are also continuing to decline,” Zollner said.

„Company estimates of where their own sales prices will be in three months fell from a four-month range of 1.8-1.9 percent, a broad 0.6 percentage point to 1.2 percent.”

ANZ Chief Economist Sharon Zollner.

Sharon Zollner.
Photo: RNZ / Dom Thomas

ANZ companies have expressed concern about inflation, interest rates and low turnover.

„Low turnover is a critical issue for the retail and manufacturing sectors. The agricultural sector is more concerned about non-wage costs and interest rates. The labor shortage turn is evident across all sectors.”

Zollner said the RBNZ’s efforts to reduce inflation were working.

„The economy is clearly weak as RBNZ intended, but more than that, we are seeing renewed meaningful progress in reducing inflationary pressures.

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„There is still a long way to go, but we are confident that the RBNZ will be in a position to cut the official cash rate significantly before August next year, as they currently expect.”

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