NZIER survey shows fragile recovery in business mood
Business confidence in New Zealand continued to improve during the March quarter, according to the latest Quarterly Survey of Business Opinion (QSBO) from NZIER.
However, firms remain cautious in their hiring and investment decisions, and the global economic outlook—particularly in light of new US tariffs—threatens to dampen sentiment going forward.
A net 23% of firms were optimistic about general economic conditions in the coming months, up from 9% in the previous quarter, marking the strongest confidence reading since 2016. But despite this uptick, a net 21% reported weaker trading activity over the quarter, with actual business performance remaining subdued.
The survey, conducted between 27 February and 31 March, does not reflect the market volatility and geopolitical uncertainty triggered by US president Donald Trump’s tariff announcement on 2 April.
ASB economists note that had the survey taken place after this development, results would likely have been “appreciably more downbeat”.
Labour market indicators reflect ample spare capacity. A net 17% of firms cut staff during the quarter, and future hiring expectations dropped to -2%, down from +5% in the December survey. Despite some optimism (+5%) for employment later in the year, firms remain hesitant.
Cost pressures rose sharply, with 50% of firms expecting higher costs in the next quarter, but pricing power weakened. Only a net 2% plan to raise selling prices, down from 15% previously. Retailers were the exception, with a net 24% lifting prices and 32% expecting further increases.
Profitability remains under strain, with a net 32% of firms reporting a decline in profits last quarter. Margin compression persists, exacerbated by rising costs and weak demand.
The results add weight to expectations of a 25-basis point cut in the official cash rate (OCR) at the Reserve Bank of New Zealand’s monetary policy review on 9 April. ASB economists suggest more cuts may follow, possibly pushing the OCR below 3% by year-end as risks of a global slowdown mount.
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