But the current environment remains tough, Kiwibank economists say
Kiwibank economists reported a significant increase in business confidence following the RBNZ’s first rate cut, with ANZ’s latest survey showing a 23-point rise to a decade-high of +51 in August.
“Confidence and hope for better days is returning,” said Kiwibank’s Jarrod Kerr, Mary Jo Vergara, Sabrina Delgado (pictured above, from left to right).
Positive indicators for economic outlook despite challenges
While businesses are feeling more optimistic, with forward-looking indicators on activity, hiring, and profits all improving, Kiwibank economists cautioned that the current environment remains tough.
“Actual better days are probably still a while off,” they noted, predicting subdued growth for the remainder of 2024.
Consumer confidence and building approvals on the rise
Consumer confidence also lifted four points in August, reflecting relief from rate cuts and decreasing inflation. Additionally, residential building consents surged 26% in July, although they remain down 22% year-over-year.
“We desperately need a solution to housing supply,” the Kiwibank economists said.
Kiwi dollar strengthens amid US dollar weakness
In financial markets, the Kiwi dollar outperformed last week, bolstered by strong business confidence and a weakening US dollar.
“The Kiwi popped to a high of 0.6293,” Kiwibank Trader Mieneke Perniskie said, with expectations of further range-bound trading this week.
Outlook for 2025/26 brighter, but challenges remain
Looking ahead, Kiwibank economists foresee a brighter outlook for 2025/26, with continued rate cuts expected to support growth. However, they warn that the challenges of 2024 are not over, particularly with a contracting economy and tight financial conditions still weighing on the market.
Read the Kiwibank commentary in full here.
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