Confidence slips, spending pivots, and price hikes stall as firms respond to tighter trading
New insights from economist Tony Alexander’s July 2025 business survey revealed growing caution among Kiwi firms, with constrained pricing power, subdued confidence in the economy, and a clear pivot in spending strategies.
The monthly survey drew responses from 425 businesses across various sectors.
Price hikes now off the table
Fewer businesses are planning to raise prices this year, with the trend reversing since May.
From September last year to April 2025, there was a steady increase in the net proportion of our business respondents planning to raise prices over the coming year. However, that trend reversed in May – shifting from a net 1% expecting price hikes to a net 13% now anticipating price cuts.
Alexander (pictureda) noted the shift reflects deteriorating confidence in the economy and reduced pricing power under tight conditions.
“This is good news for the Reserve Bank as it attempts to keep inflation between 1% and 3%,” he said.
The business sector’s price restraint contrasts with rising consumer inflation, as both Westpac and ASB forecast headline CPI to lift to between 2.8% and 3.1% for the June quarter.
Spending focused on social media, tech, and customer retention
Amid rising compliance costs and weaker demand, firms are doubling down on select areas of investment.
A record net 36% of businesses this month reported plans to increase their spending on social media.
The four top areas of planned spending are social media, technology, customer retention, and strategy development.
By contrast, businesses intend to cut back on inventory levels, advertising, and climate change measures, with inventory drawdowns now easing from their peak.
Staff morale stable but revenue expectations slip
While staff morale is expected to hold steady, revenue expectations are drifting lower.
A net 37% of businesses expect their revenue to improve over the next 12 months – down from 45% last month but broadly in line with April and May results.
Although businesses had high hopes for 2025, many are now shifting their optimism to 2026.
Labour market tightness resurfaces
The survey indicates a slight tightening in the labour market, despite softening economic sentiment.
A net 5% of businesses currently say it’s easy to find good staff – a modest tightening from 7% last month and 15% in May
Alexander suggested this may reflect offshore migration.
“This may be because of the loss of skilled people offshore, especially to Australia,” he said.
Finance access, plant investment show strength
One area that surprised on the upside this month was access to finance, with multiple businesses reporting improved lending conditions. Investment intentions also remain solid.
Businesses continue to report solid intentions to invest in new plant and equipment.
This trend, Alexander noted, is “important for strengthening economic activity now and setting the stage for higher productivity down the track.”
For more detailed insights, read the full MintHC Tony Alexander Report (July 2025).
