ANZ‘s Business Outlook survey shows confidence has taken a hit in April as US trade policy rattled markets.

“The month of April was punctuated by global market turmoil precipitated by US tariff announcements,” said ANZ chief economist Sharon Zollner.

“We can divide our sample into those received early in the month, mostly between 1 and 4 April, and those received late in the month.”

“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.”

However, the data did support the idea that the turmoil has had a marked negative impact on most forward-looking indicators, she said.

The impact was most acute on headline business confidence and businesses’ plans to invest.

Business confidence fell nine points to +49 in April.

Meanwhile, expected own activity fell just one point to 48.

More positively, past own activity jumped 10 points to 11, while past employment jumped eight points to two, Zollner said.

“Activity indicators overall continue to tell a tale of an economy that’s recovering,” she said.

Pricing and cost indicators indicated a margin squeeze from ongoing cost pressures.

But 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.

“That indicates margin squeeze – a long-running theme – amidst persistent cost pressures,” she said.

Zollner noted that ANZ had recently revised down its 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”.

ANZ economists now expect the Reserve Bank to cut the Official Cash Rate to 2.5% – 50 basis points lower than previously assumed.

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.