New Zealand business confidence strengthened sharply in July, with ANZ’s Business Outlook survey suggesting firms have become increasingly optimistic about the economic outlook despite heightened geopolitical uncertainty. Headline business confidence rose sharply to 56.1 from 36.6, while firms’ own activity outlook climbed to 49.3 from 36.9. Export, investment and employment intentions also improved, pointing to a broad-based recovery in business sentiment.
The survey painted an encouraging picture for the economy, but ANZ cautioned that the outlook remains unusually uncertain as businesses grapple with volatile oil prices and escalating tensions in the Middle East. “It feels like we need a weekly business confidence survey at the moment,” the bank noted, highlighting how rapidly changing geopolitical developments have driven sharp swings in energy prices. The key question, according to ANZ, is whether firms and households continue with investment and spending plans or retreat into a more defensive stance if uncertainty persists.
For now, businesses appear to be looking through the near-term volatility. Just as importantly for the Reserve Bank of New Zealand, inflation indicators continued to soften even as confidence improved. One-year inflation expectations, pricing intentions and cost expectations all declined from June, suggesting the recovery in business sentiment has yet to generate renewed inflation pressure. That combination of firmer growth expectations and easing inflation should give policymakers greater confidence that the economy can continue recovering without requiring a renewed tightening response.
Economic Data
| Indicator | July | June |
|---|---|---|
| Business Confidence | 56.1 | 36.6 |
| Own Activity Outlook | 49.3 | 36.9 |
| Export Intentions | 26.6 | 18.1 |
| Investment Intentions | 22.8 | 16.5 |
| Employment Intentions | 18.1 | 9.4 |
| Residential Construction | 42.5 | 25.0 |
| Commercial Construction | 48.9 | 28.9 |
| Profit Expectations | 28.7 | 13.0 |
| Ease of Credit | 1.4 | -1.9 |
| Activity vs. Year Ago | 9.7 | 9.0 |
| Employment vs. Year Ago | -0.3 | -4.6 |
| Pricing Intentions (Net %) | 47.2 | 50.7 |
| Pricing Intentions (3 Months) | 1.78% | 2.03% |
| Cost Expectations (Net %) | 78.2 | 84.7 |
| Cost Expectations (3 Months) | 2.70% | 3.24% |
| Wage Expectations (12 Months) | 2.52% | 2.53% |
| Inflation Expectations (1 Year) | 3.14% | 3.36% |
Key Takeaways
- Business confidence jumped to 56.1, while firms’ own activity outlook rose to 49.3, pointing to a broad-based improvement in economic sentiment.
- Export, investment and employment intentions all strengthened, suggesting businesses remain willing to expand despite heightened geopolitical uncertainty.
- Construction was a standout performer, with both residential and commercial activity expectations reaching multi-month highs.
- Inflation indicators continued to moderate. One-year inflation expectations, pricing intentions and cost expectations all declined from June.
- The survey presents a favorable combination of stronger growth expectations and easing inflation pressures, supporting the RBNZ’s view that the recovery can continue without reigniting inflation.
- ANZ cautioned that sharp swings in oil prices and Middle East tensions have significantly increased uncertainty. Whether firms and households maintain spending and investment plans will be critical for the medium-term outlook.
