New Zealand’s business confidence deteriorated sharply in March, with ANZ Business Confidence falling from 59.2 to 32.5 as geopolitical tensions disrupted the recovery narrative. The decline was even more pronounced in late-month responses, which averaged -23, highlighting how sentiment worsened as uncertainty intensified following the escalation in the Middle East.
The hit to sentiment was matched by a slowdown in activity expectations. Own Activity Outlook dropped from 52.6 to 39.3, suggesting firms are already seeing a pullback in demand as decision-making is deferred. ANZ noted that while recovery had begun to take hold earlier in the year, conditions shifted quickly, with businesses reporting a direct impact on activity as uncertainty increased.
At the same time, inflation pressures moved in the opposite direction. Inflation expectations rose from 2.93% to 3.08%, while the share of firms expecting to raise prices climbed 7 points to 60%, and even higher to 67% in late responses. The average expected price increase also accelerated from 2.0% to 2.4%, or 3.3% in the late-month sample, pointing to growing pricing power despite weakening demand.
Cost pressures are also intensifying, with 85% of firms expecting higher costs, up from 79% and the highest since early 2023. The late-month reading of 93% marks the strongest since mid-2022.
