Business confidence has dropped quite sharply in the first quarter of the year, pointing to an economy that feels more uncertain again, with businesses becoming more cautious about how they make decisions.
The latest Institute of Economic Research (NZIER) December quarter business survey shows a steep collapse in sentiment, with just a net 1% of respondents expecting economic conditions to improve in the months ahead.
That compares to 39% in the previous survey.
This is also the weakest confidence reading since September 2024.
The downturn in confidence is not uniform across the economy. Construction remains the most pessimistic sector, reflecting ongoing pressure from higher financing costs.
By contrast, manufacturing reported relatively stronger confidence, though still within a subdued overall climate.
Despite the collapse in sentiment, some underlying indicators remain more resilient than headline confidence suggests. Businesses continue to report steady demand, and the share expecting improvement in the future has only eased slightly, sitting at 13%.
Investment and hiring intentions also remain in positive territory, although both are increasingly constrained by rising operating costs.
NZIER principal economist Christina Leung noted that pricing behaviour and cost pressures indicate inflation risks remain contained for now, largely because weaker demand is limiting firms’ ability to pass on higher costs.
However, she also signalled that monetary policy is likely to remain tight, with expectations the Reserve Bank could begin lifting interest rates again as early as July.