Businesses in New Zealand are feeling optimistic about the upcoming year, with the latest survey showing that business confidence remains high. The November 2024 results indicate a business confidence level of 64.9, slightly lower than the previous month but still close to a ten-year high. This positive sentiment is reflected in various sectors such as agriculture, retailing, and services.
One notable aspect of the survey is the increase in firms’ own activity expectations, which rose by 2 points to 48. This is seen as a positive sign, as these expectations tend to align closely with GDP growth. Despite a slight drop in general sentiment compared to October, the overall outlook for businesses in New Zealand appears to be positive.
The recent surge in confidence can be attributed to the Reserve Bank’s shift in stance, from considering an interest rate hike to implementing OCR cuts. This change in monetary policy has boosted businesses’ confidence in the economy and their own prospects for growth. Additionally, there are signs of gradual improvement in current conditions, with a net 10% of firms reporting a decrease in activity compared to the same period last year.
In terms of inflation, the survey results show fairly benign indicators. Expected inflation for the upcoming year has decreased to 2.5%, reflecting stable price expectations among businesses. While firms’ pricing intentions dipped slightly, they remain above the long-run average. This suggests that businesses are managing their cost pressures effectively and expecting moderate wage growth in the coming months.
Looking ahead, forecasts predict a slight decrease in GDP for the September quarter followed by a modest increase in the December quarter. These forecasts align with the Reserve Bank of New Zealand’s projections, indicating a consensus on the outlook for the economy. Despite the ebullient sentiment captured in the business confidence survey, it supports the overall expectation of a return to modest economic growth in New Zealand.
It is important to note that while the survey results provide valuable insights into business sentiment and economic trends, they are not definitive indicators of future performance. Various factors, including risks and uncertainties, can impact the actual outcomes compared to the forecasts. However, the overall positive outlook reflected in the survey bodes well for the New Zealand economy as businesses continue to show confidence in their future prospects.
