Agriculture and retail lead gains in business optimism
Business confidence held firm in September, with a net 50% of firms expecting better conditions ahead, according to the latest ANZ Business Outlook survey.
Expected own activity rose four points to net 43% – the strongest level in five months – while past activity and employment also showed modest gains.
Sharon Zollner (pictured above), ANZ NZ chief economist, said forward-looking indicators were mixed, but noted some resilience.
“Forward-looking questions are a lot more positive than the backward-looking ones – that theme exists across our consumer confidence survey too, and is typical in slowdowns,” Zollner said.
Westpac NZ senior economist Michael Gordon agreed that sentiment remains solid in spite of recent economic volatility.
“Business sentiment remains strong in the face of still-difficult current conditions and has picked up a little in the wake of the RBNZ’s dovish pivot in August,” Gordon said.
Inflation pressures persist
Inflation signals nudged higher in September. A net 46% of firms expect to raise prices in the next three months, up three points from August, while 75% expect costs to rise. One-year-ahead inflation expectations lifted from 2.63% to 2.71%.
Wage growth indicators also pointed upward, with past wage growth rising from 2.14% to 2.54%. Expected wage growth, however, was steady at 2.39%.
“The survey’s pricing indicators were also a touch higher this month,” Gordon said. “Both of these measures have been fairly rangebound over the last year, albeit at higher levels than we saw through the pre-COVID years.”
Sector contrasts
ANZ’s heatmap showed mixed signals across industries. Construction activity looked brighter, services cooled slightly, while retail reported stronger past activity but remained weighed down by low turnover. Exports remained a soft spot.
Agriculture was a relative bright spot, buoyed by strong export prices for meat and dairy.
“Own-activity expectations were up across all sectors, with the biggest gains seen in agriculture and retailing,” Gordon said.
Confidence dent from GDP data
Mid-month, Q2 GDP figures revealed the economy had shrunk more than expected, sparking a wave of negative headlines. ANZ noted that late-month responses to the survey showed softer activity, suggesting the GDP release dented sentiment.
“It appears that the news did hit confidence,” Zollner said. “The late-month responses are more volatile by dint of being a smaller sample, but it’s a pretty consistent story.”
Key concerns for firms
Every quarter, ANZ asks businesses to rank their biggest problems. Non-wage costs have grown in importance, while interest rates have slipped down the list. Competition and low turnover continue to dominate, with cashflow and access to finance ranking relatively low.
“The renewed attention on non-wage costs is coming out of services, manufacturing, and agriculture,” Zollner said.
Outlook: RBNZ backstopping growth
Despite ongoing challenges, Zollner said New Zealand’s macroeconomic position has improved after several years of strain.
“It’s been a rough few years,” she said. “But the weakness has dragged on longer than expected, and the costs are mounting. The good news is that the RBNZ is now seeing things that way as well and is set to backstop the growth outlook with a lower official cash rate.”
Gordon added that while current conditions remain tough, the forward indicators are encouraging.
“Expectations for their own performance picked up from 38.7 to 43.4, the highest reading since US President Trump’s tariff announcement in April,” he said.
For more insights, read the Westpac and ANZ reports.
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