Confidence remains high, but rising cost and wage pressures keep inflation risks alive.
Summary:
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Business confidence fell 5 points to 59.2 but remains elevated.
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Own-activity outlook improved slightly to 52.6.
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Pricing intentions eased marginally but remain high at 53%.
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Cost expectations rose to 79.4% — highest since mid-2023.
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Wage expectations lifted to 3.01%, highest since April 2024.
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Inflation expectations rose to 2.93%, highest since July 2024.
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Construction indicators cooled sharply; agriculture strengthened.
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Credit conditions deteriorated as higher interest rates bite
New Zealand business confidence retreated from extreme highs in February but remains firmly expansionary, with the ANZ Business Outlook headline index easing 5 points to 59.2 Activity indicators remain solid, though sector divergence is widening.
The own-activity outlook edged up to 52.6, with stronger late-month responses following the RBNZ’s recent Monetary Policy Statement, which helped ease financial conditions. However, experienced activity and employment indicators were softer in construction, highlighting ongoing volatility in that sector.
Inflation pressures remain the dominant theme. The net percentage of firms intending to raise prices over the next three months slipped to 53.3% from 56.5%, but this only partially reversed January’s surge. Average pricing intentions eased slightly to 1.97% over three months. Meanwhile, cost expectations climbed to 79.4%, the highest since July 2023, and expected wage growth rose to 3.01%, its strongest reading since April 2024.
Inflation expectations one year ahead increased to 2.93%, the highest since July 2024, challenging assumptions that inflation pressures will steadily fade. ANZ notes that pricing and wage indicators are not yet consistent with a smooth disinflation path, even though headline CPI is expected to return to the RBNZ’s 1–3% target band in Q1.
Sectorally, agriculture lifted strongly, likely reflecting the 19% rise in dairy prices so far this year, while construction cooled sharply. Manufacturing remains the most confident sector (77), while retail pricing intentions are particularly elevated.
Overall, the survey signals continued economic momentum but persistent inflation pressure, complicating the RBNZ’s confidence that inflation is durably heading back to 2%.