Business confidence improved in July, but remains subject to fast-moving developments in the Middle East.
Key results, July 2026
- Business confidence: 56.1 (Prev: 36.6)
- Expectations for own activity: 49.3 (Prev: 36.9)
- Activity vs same month one year ago: 9.7 (Prev: 9.0)
- Inflation expectations: 3.14% (Prev: 3.36%)
- Pricing intentions: 47.2 (Prev: 50.7)
There was a strong lift in business confidence in the July ANZBO survey. General sentiment rose from 36.6 to 56.1, while firms’ own-activity expectations rose from 36.9 to 49.3. Both of these readings were the highest since the Iran conflict began, reaching just below their February levels.
The speed at which things have been evolving in the Middle East means that even relatively frequent (monthly) indicators may struggle to remain timely. Crude oil prices had receded to around US$70 a barrel at the start of July, but the resumption of hostilities between the US and Iran saw them surge to as high as US$100 a barrel. Unusually, though, fuel prices at the pump had barely moved by the end of the survey period.
This was partly reflected in the breakdown of the survey: early responses were much more positive compared to the June survey, while the later responses (a smaller group) were more in line with the June results. This suggests that we may see less optimism in the August survey, though again that depends on how things play out in the coming weeks.
A net 10% of firms reported that their activity was up on the same time last year, compared to a net 9% in June. Staff levels were reported to be about flat on last year, compared to the declines reported in May and June. This is consistent with our view that the Middle East conflict is acting as a headwind to an economy that was otherwise gathering momentum.
The various pricing measures in the survey were generally softer in July, which again suggests that businesses were responding to the previous drop in fuel prices rather than the more recent headlines. Inflation expectations for the year ahead fell from 3.36% to 3.14%, the lowest reading since March. Firms’ own pricing intentions fell to their lowest since last October. Actual and expected wage growth have remained broadly unchanged at low levels since the conflict began.
It remains the case that the pricing measures in the survey are elevated compared to pre-Covid levels, and as shown in last week’s CPI report, core inflation is running on the higher side of the RBNZ’s inflation target. That’s not an ideal starting point for the RBNZ as the economy starts to regain momentum, and underscores the case for removing some of the policy stimulus that was put in place last year. Following the increase in the OCR in early July, we expect further hikes in the coming months, but at a gradual data-dependent pace.
