URGENT UPDATE: Business confidence in New Zealand has surged to its highest level in over a decade, as the economy shows signs of recovering from a prolonged slowdown. The latest Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research reveals a net 39% of firms expect economic conditions to improve in the coming months, a significant jump from 17% in the previous quarter.
This remarkable turnaround marks the highest confidence level since March 2014, highlighting a decisive shift after an extended period of pessimism among businesses. As lower interest rates begin to take effect, the data suggests a robust economic recovery is underway.
In the December quarter, only a net 3% of firms reported a decline in their trading activity, indicating stabilization in business operations. According to NZIER, while there remains a gap between confidence and actual performance, the overall sentiment points towards a strengthening economy.
Key indicators from the survey show improved intentions among businesses. A net 22% of firms plan to increase staffing levels in the next quarter, a positive shift from previous trends. Furthermore, investment plans for buildings and plant have turned positive after being negative in the September quarter, signaling renewed optimism.
Early signs indicate a tightening labor market, with an increasing number of firms experiencing difficulty in finding skilled workers. The manufacturing sector has emerged as the most optimistic, buoyed by stronger domestic and export demand. Retail and services sectors also report improved sentiment, although profitability challenges persist.
Meanwhile, the construction sector continues to lag behind due to weak demand and declining profitability, despite ongoing cost pressures being subdued. Overall, pricing indicators suggest that inflation remains contained, with demand increasing but spare capacity still apparent.
Looking ahead, NZIER forecasts that the Official Cash Rate (OCR) will not see further cuts, projecting a trough at 2.25% before the Reserve Bank of New Zealand begins tightening its policy in the second half of 2026.
This surge in business confidence not only reflects the resilience of the New Zealand economy but also offers a glimmer of hope for future growth and employment opportunities. As conditions continue to improve, stakeholders and policymakers will be closely monitoring these developments.
Stay tuned for more updates as this story unfolds, and share your thoughts on how this rising confidence may impact New Zealand’s economic landscape.
