Business confidence fell sharply after the Iran conflict, with the gloom deepening over the course of March.
Key results (seasonally adjusted)
- General business situation: +1 (Prev: +39)
- Trading activity, past three months: 0 (Prev: -3)
- Trading activity, next three months: +13 (Prev: +22)
- Average selling prices, past three months: +22 (Prev: +13)
- Average selling prices, next three months: +43 (Prev: +25)
Business confidence has unsurprisingly taken a knock since the Iran war kicked off at the end of February. Indeed, given the fast-moving situation, the headline results of the Quarterly Survey of Business Opinion understate the degree of the shock. Firms noted ongoing cost pressures, and a growing number of them are intending to raise their prices, but their ability to do so remains mixed. Overall, today’s survey probably underscores rather than deepens the dilemma that the RBNZ will be facing in the coming months.
Sentiment about the general business situation fell from +39 to +1, the lowest reading since September 2024 – and that doesn’t come close to telling the full story. Surveying began on 6 March, and the initial batch of responses was a net 34% positive. After the first reminder in mid-March, the next batch was a net 7% negative, and the last batch at the end of March was a whopping net 57% negative. NZIER didn’t provide this breakdown for the other survey questions, but we can reasonably assume that there was a similar deterioration over the course of the month.
The own-activity measure for the last quarter actually picked up a little compared to the December survey, emphasising that the economy was regaining some momentum before the Iran war. Expectations for the next quarter fell from +22 to +13, though again the picture is likely to have looked significantly worse by the end of the survey period.
A net 37% of firms reported a rise in their costs, unchanged from last quarter. Expected costs for the next quarter were a net 45%, up from 39% in December – not a big increase, but this measure was already at elevated levels.
A net 22% of firms increased their prices last quarter, compared to 13% in December. More notably, a net 43% plan to raise their prices in the next quarter, the highest reading since September 2023. Firms’ ability to raise their prices remained mixed across sectors though: for instance, builders reported a sharp rise in costs but a net 25% lowered their own prices last quarter.
Employment was down a net 5% past quarter, after a brief pickup in December, and hiring intentions also turned negative again. That said, there is evidence of labour shortages emerging again for skilled roles, though not for unskilled ones.
