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New Zealand Businesses Report

New Zealand Businesses Report Falling Price. New Zealand businesses reported declining price pressures and reduced wage demands in May, potentially paving the way for the Reserve Bank of New Zealand (RBNZ) to lower interest rates sooner than anticipated. The May ANZ business outlook survey revealed that firms are feeling the strain of soaring interest rates and high inflation, particularly in the services sector where activity readings have weakened.

“It’s all part of the RBNZ’s plan. We’re optimistic that they’ll be able to cut the official cash rate earlier than they expect as slowing domestic demand continues to weigh on inflation pressures,” said Sharon Zollner, New Zealand chief economist at ANZ.

Despite these findings, the RBNZ signaled last week that interest rates might need to remain restrictive for longer due to stubborn inflation, delivering a hawkish surprise to money markets. The central bank left its official cash rate unchanged at 5.50% but adjusted its expected track for the OCR upward, citing concerns about domestic inflation pressures and capacity constraints within the economy.

The construction sector reported the largest decline in activity compared to a year earlier, with all sectors except agriculture also experiencing negative growth, according to Zollner. There was a new low recorded in the net proportion of firms intending to raise their prices in the next three months, although the proportion of firms expecting higher input costs remained high.

Estimates for selling prices in the next three months were flat or fell across all sectors. Wage increases compared to a year earlier fell from 4.0% in April to 3.4% in May, with the weakest growth in the retail sector. Expectations for wages over the next 12 months also declined, from 3.0% to 2.8%, indicating a potential easing in labor cost pressures. New Zealand Businesses Report Falling Price.

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