Supply chain worries and rising costs dampen sentiment across sectors
New Zealand businesses are bracing for a turbulent year ahead as geopolitical conflict threatens to derail nascent economic recovery. Mounting concerns about supply chains, input costs, and customer demand are creating direct headwinds for mortgage advisers and their clients.
Tony Alexander's latest Business Insights survey of 332 firms reveals a sharp deterioration in confidence since conflict erupted in the Middle East. The report identifies supply chain functioning as the area experiencing the biggest lift in concerns this year, with input cost anxiety intensifying sharply.
Confidence takes a hit despite green shoots
Business optimism has plummeted, with only 32% of firms (net) now anticipating revenue growth over the coming year, down from 55% in February and 59% at the end of 2025.
The survey captures sentiment during the first half of March, as global events began weighing heavily on local decision-making.
The anxiety is particularly acute in property-related sectors.
Residential construction respondents reported volatile conditions, with one Wellington-based builder noting early signs of improvement "but then Iran happened," expressing concern about prolonged supply chain disruptions.
Another construction sector respondent noted that despite strong January and February enquiry levels, there has been a notable drop in March inquiries due to uncertainty the conflict is causing.
Property and finance professionals are feeling the squeeze acutely.
Mortgage advisers reported low levels of new enquiries attributed to Middle East tensions, whilst recruitment consultants described cancelled job placements as clients grow nervous about profitability and staffing expansion.
Input costs rising but pricing power uncertain
Fuel price increases are already flowing through to business costs, yet firms remain hesitant to pass expenses on to customers. Surprisingly, the survey recorded a small decline in the net proportion of businesses planning price rises over the coming year, despite growing discussion of cost pressures.
Although residential property enquiry has shown signs of life in recent months, commitment remains weak. Real estate agents report properties taking longer to sell, with buyers hesitant and vendors struggling with expectations. Agents describe the mood as cautious, with customers finding it hard to commit.
AI adoption accelerates amid uncertainty
Despite the prevailing caution, one bright spot is accelerating technology adoption.
The survey reveals AI adoption is spreading across sectors, with growing expectations of workplace disruption from the technology.
Despite this technological progress, traditional concerns about politics, the general economic outlook, and customer demand continue to dominate business thinking.
Labour availability concerns have also edged higher, though staff shortages remain less acute than during the post-pandemic period.
The report suggests recovery remains fragile and "lumpy" across sectors, with any sustained improvement dependent on how quickly geopolitical tensions ease and whether rising costs can be absorbed without choking off the tentative upturn in activity.
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