New Zealand’s Q4 Business Confidence Rebounds to +16% Despite Persistent Demand Weakness

by Indust@seo
New Zealand

Prime Highlights:

New Zealand’s Q4 business confidence jumps to +16%, up from -1% in the previous quarter.

A net 9% of firms anticipate economic improvement, a significant turnaround from the previous quarter’s net -4%.

Sector-specific optimism is led by the building sector, while retail and manufacturing remain cautious.

Key Background:

New Zealand’s business confidence saw a substantial improvement in the fourth quarter of 2024, according to the latest Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER). The survey revealed that business confidence surged to +16%, a sharp increase from the previous quarter’s modest -1%.

The data indicates that a net 9% of firms are now expecting improvements in general economic conditions, compared to a net -4% in Q3 2024. This shift reflects a more positive outlook, despite ongoing challenges in demand. A notable 26% of firms reported a decline in trading activity during the quarter, suggesting that the economic recovery is still fragile.

Sector-wise, the building sector showed the most optimism, with a net 29% of businesses expressing positive expectations. While new orders and output have contracted, there is optimism that a strong pipeline of future construction work will drive recovery. The retail sector also reported optimism about economic conditions, though weak demand and ongoing cost pressures have limited profitability. Similarly, the services sector remains positive, largely due to expectations of reduced household mortgage repayments. In contrast, the manufacturing sector demonstrated improved sentiment but remained less optimistic than others, as higher costs and reduced pricing power offset gains from increased export demand, aided by a lower NZD.

Despite improved confidence, firms remain cautious about investment and hiring. A net 17% of businesses reduced staff numbers in Q4, and many companies are delaying investment in buildings, plant, and machinery, waiting for clearer signs of sustained demand recovery.

On the inflation front, the survey indicated easing pressures, with fewer firms reporting higher costs (35%), and only 10% raising prices. This reflects a softening of inflationary pressures and continued weak demand, which has eased capacity constraints. Overall, while business confidence and sector-specific optimism have improved, the outlook remains cautious, with weak demand, restrained hiring, and conservative investment plans dominating the economic landscape.

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