Business confidence has softened in the wake of the US tariffs – though next month may tell a different story again.
Key results, May 2025
- Business confidence: 36.6 (Prev: 49.3)
- Expectations for own trading activity: 34.8 (Prev: 47.7)
- Activity vs same month one year ago: 5.1 (Prev: 11.3)
- Inflation expectations: 2.71% (Prev: 2.65%)
- Pricing intentions: 45.4 (Prev: 49.4)
Business confidence slipped further in the ANZ business opinion survey for May. This was the first month where all of the respondents will have had time to absorb US President Trump’s “Liberation Day” tariff announcement and the subsequent developments. While the main confidence measures are still above their long-run averages, they are now down substantially from the highs seen at the end of last year.
ANZ did note that, as in April, there was a shift in sentiment over the course of the month. The responses in the second half of May were notably more optimistic than those in the first half (whereas in April they were much weaker in the second half than in the first).
What this suggests is that there’s an element of reading headlines (and watching share prices) that goes into these responses, rather than necessarily reflecting how the US tariffs are affecting their own businesses. In that respect, it will be interesting to see how the June survey reflects today’s developments, with the US courts striking down all of Trump’s reciprocal tariffs.
Having said all of that, we can’t attribute all of the survey results to US tariff policy. The biggest fall in confidence in May was seen in the construction sector, with retailing also noticeably softer on some aspects.
A net 5% of firms said that their activity was up on the same time last year. This is a rather soft comparison though, as it was through the middle part of 2024 when economic conditions took a marked turn for the worse.
The one indicator that ticked higher this month was inflation expectations for the year ahead, which rose from 2.65% to 2.71%. This followed the release of the Q1 CPI figures in April, where the annual inflation rate rose more than expected to 2.5%. However, firms’ own pricing intentions eased back for a second month, and there was a slight drop in expected cost pressures.
