UPDATE: Business confidence in New Zealand has surged to its highest level in over a decade, according to the latest Quarterly Survey of Business Opinion (QSBO) released by the New Zealand Institute of Economic Research (NZIER). This comes as evidence mounts that the country’s economy is emerging from a prolonged slowdown, with confidence levels jumping to a remarkable 39% of firms expecting improved economic conditions in the coming months.
The latest QSBO results, announced earlier today, reveal a striking increase from 17% in the September quarter, marking the highest confidence since March 2014. This decisive turnaround follows an extended period of pessimism among businesses and is a clear indicator of a strengthening economic recovery as lower interest rates begin to take effect.
In a notable shift, firms’ own trading activity has stabilized, with just 3% of businesses reporting a decline in activity for the December quarter. The NZIER noted that while there remains a gap between confidence and realized activity, the survey results suggest a recovery is indeed starting to take shape across various sectors.
The uplift in business sentiment has translated into increased hiring intentions, with 22% of firms planning to boost staff numbers in the next quarter. Additionally, investment plans for buildings and equipment have turned positive, a significant change from the previous quarter’s negative outlook.
Early indicators show that spare capacity is beginning to diminish, with a slight uptick in the number of businesses struggling to find skilled labor. The optimism is widespread, particularly in the manufacturing sector, which is now the most confident, bolstered by rising domestic and export demand. Retail and services also reported improved sentiment, although profitability continues to face pressures.
However, the construction sector remains challenged, grappling with weak demand, declining profits, and ongoing price cuts that have kept cost pressures subdued. Overall, cost and pricing indicators suggest that inflation remains contained, a critical factor for the economy moving forward.
Looking ahead, with demand improving but spare capacity still apparent, the NZIER expects no further cuts to the Official Cash Rate (OCR). They forecast that the policy rate will bottom out at 2.25% before the Reserve Bank of New Zealand begins tightening in the second half of 2026.
As New Zealand businesses embrace this renewed confidence, the implications for the economy are significant. Stakeholders will be closely monitoring these developments as they unfold, anticipating how this surge in optimism will impact hiring, investment, and overall economic growth in the months ahead.
Stay tuned for more updates as this story develops.
