Business confidence continues to recover as cost pressures ease. This reinforces our expectations for an on-hold decision from the RBNZ next week.
Key Results, June 2026
- Business confidence: 36.6 (Prev: 10.0)
- Expectations for own activity: 36.9 (Prev: 25.6)
- Activity vs same month one year ago: 9.0 (Prev: 14.8)
- Inflation expectations: 3.36% (Prev: 3.63%)
- Pricing intentions: 50.7 (Prev: 56.7)
Activity Expectations Continuing to Recover
The June business outlook survey pointed to a further decline in the proportion of firms reporting an increase in activity from year-earlier levels. However, encouragingly, confidence in the economic outlook has continued to recover in the latest survey, as have businesses expectations for their own trading activity over the coming year. That improvement comes against the backdrop of easing global tensions and a related sharp fall in oil prices.
The survey’s activity gauges, including those for trading activity, hiring and investment spending, all remain noticeably below the levels we saw in February before the Middle East conflict. However, they have retraced much of their recent declines. That’s consistent with the economy gradually regaining momentum as we enter the second half of the year.
Pricing Pressures Easing…
Importantly, the survey’s various inflation gauges have been dropping back. That includes expectations for inflation over the year ahead which fell from 3.63% in May back to 3.36% this month. We also saw a fall in the number of firms who are planning on raising prices. Firms’ forecasts for wage growth remained at subdued levels in June.
…Which Will Help to Assuage the RBNZ’s Concerns About the Inflation Outlook Ahead of Next Week’s Interest Rate Meeting
All of the survey’s inflation measures remain higher than the levels we saw prior to the Middle East conflict, which is consistent with the still high level of domestic fuel prices.
However, the easing in these measures over the past couple of months is still important for the RBNZ. At the time of the RBNZ’s last policy meeting, several members of the Monetary Policy Committee voted to keep rates on hold and wanted to see if the rise in fuel costs was going to lead to a more widespread and persistent lift in inflation. With oil prices down sharply and gauges of businesses pricing plans dropping back, the RBNZ is likely to be less concerned about a lift in longer term inflation. As a result, we continue to expect the RBNZ will keep the OCR on hold at next week’s interest rate review.
As we noted in our recent forecast update, we still expect the OCR will rise over the coming months, but at a gradual data-dependent pace. We expect 25bp hikes in September and December.
