Business confidence rebounding
Business confidence increased in the final quarter of last year and a net 39 per cent of firms expect better general economic conditions over the coming months, according to a new survey.
The latest Quarterly Survey of Business Opinion from the New Zealand Institute of Economic Research (NZIER) notes this is up from a net 17 per cent in the September quarter and business confidence is at its highest level since March 2014.
The seasonally adjusted figures also show improvements in companies’ trading activity, with only a net three per cent of firms reporting a decline in activity in their own business in the December 2025 quarter.
Christina Leung, NZIER deputy chief executive, says while a gap between business confidence and domestic trading activity remains, the results suggest an economic recovery is starting to take shape as the effects of lower interest rates flow through to the broader economy.
“Given these positive developments, firms’ hiring and investment intentions have increased,” she adds.
“A net five per cent of firms increased staff numbers in the December quarter and a net 22 per cent are planning to hire in the next quarter.
“A net 11 per cent of firms plan to increase investment in buildings over the coming year, while a net seven per cent plan to increase investment in plant and machinery. This contrasts with the negative investment appetite reported by firms in the September quarter.”
Leung, pictured, adds there are signs spare capacity in parts of the New Zealand economy is reducing.
This is reflected in the survey’s labour market indicator, which shows a small proportion of firms reporting it was more difficult to find skilled workers in the December quarter. Meanwhile, firms continue to report it being easier to find unskilled workers.
Confidence rebounded in all sectors surveyed by NZIER, with manufacturing now the most optimistic sector.
A net 56 per cent of the manufacturers surveyed are expecting better times ahead, which contrasts with them being the least optimistic sector in the September quarter.
The building sector is feeling more upbeat about the outlook, with more than half of the firms surveyed expecting general economic conditions to improve in the coming months.
However, actual demand remained soft, with building sector firms continuing to report reduced new orders and output in the December quarter.
“Sentiment in the retail and services sectors also rebounded,” continues Leung. “For retailers, although domestic sales were weak in the December quarter, new orders picked up, and retailers feel hopeful about a recovery in demand over the coming months.
“Although the proportion of retailers whose prices increased in the December quarter rose, profitability remained weak as cost pressures intensified.”
Cost and pricing indicators suggest inflation pressures in the New Zealand economy were broadly contained in the December quarter. Cost pressures eased, with a net 37 per cent of firms reporting higher costs in the December quarter.
Meanwhile, there was a small pick-up in the proportion of firms that raised prices in the quarter.
