New Zealand Business Confidence Slumps as Conflict Weighs, Inflation Pressures Rise, RBNZ July Hike Expected

New Zealand business confidence deteriorated sharply in the March quarter, with the NZIER Quarterly Survey of Business Opinion showing the general business situation dropping from +39 to +1. The survey highlights how the US–Israel conflict with Iran and disruptions in the Strait of Hormuz, have quickly eroded sentiment despite earlier signs of recovery.

Domestic activity held up better than sentiment suggests. Firms reported trading activity over the past three months improving from -3 to 0, indicating stabilization in near-term demand. However, forward-looking indicators softened, with expected trading activity falling from +22 to +13, pointing to growing caution as external risks intensify.

At the same time, pricing pressures picked up notably. Average selling prices over the past three months rose from +13 to +22, while expectations for the next three months surged from +25 to +43. This suggests that while demand conditions are fragile, firms are still passing through higher costs, particularly from energy and supply chain disruptions linked to the conflict.

For policy, the signal is mixed but important. NZIER sees only “modest” risk of persistently high inflation, but emphasizes elevated uncertainty around energy prices and supply chains. The RBNZ is still expected to begin tightening with a 25 basis-point hike in July, with forward-looking inflation indicators likely to determine the timing.

Full NZIER QSBO release here.