Pulse check: Economic flatline worries directors
Directors expect interest rate cuts, unstable inflation and an uncertain recovery ahead.
The official cash rate (OCR) will fall, inflation will remain volatile and the prospect of a sustainable, primary sector-led recovery is around 50/50 over the next 12 months, according to members who responded to our pulse check poll in the last Director Download.
The ‘pulse check’ was undertaken a few days after the Q2 GDP announcement that revealed a 0.9% drop from the previous quarter.
“The poll supports the general sense of the economy flatlining,” says Susan Cuthbert, from the IoD’s Governance Leadership Centre.
“The same week, ASB reported that investor confidence had declined in the June quarter, and the NZ Herald’s Mood of the Boardroom survey showed a year-on-year drop in business confidence.
“While ours was a small straw poll of directors, those who responded were aligned with some of the perspectives being shared in the business community.”
When asked about the OCR, 57% of respondents expected a 25-basis-point cut in October. A further 43% anticipated a 50-basis-point reduction.
Most directors believe inflation will remain volatile over the coming year, with 72% expecting continued unpredictability.
“That volatility is likely to impact both consumer spending and business input costs,” Cuthbert says. “The latest Auckland Business Chamber confidence report highlights inflation, interest rates and consumer demand as key areas of concern. Our members clearly share those views.”
Recent gains in agricultural exports are welcome, but members remain cautious about whether these represent the start of a broader economic recovery.
“Our members are split on the likelihood of a sustainable, primary sector-led recovery over the next 12 months,” Cuthbert says. “46% said no, 44% said yes, and 10% felt it was too close to call.”
A more comprehensive picture of governance-specific concerns will be available in the 2025 Director Sentiment Survey, due for release in November.