ANZ New Zealand Business Confidence rose 21 points to +10 in May but remained well below pre-conflict levels, with cost expectations near record highs and retail and construction activity still contracting. Manufacturing led with a confidence reading of +26, while agriculture and services also recovered. Retail remained a weak point, with activity versus a year ago falling into negative territory alongside construction, which has been contracting for several months.
Cost pressures showed little sign of easing. The net proportion of firms reporting higher costs held at 90.4%, unchanged from April, with agriculture reaching 100%. The gap between what businesses expect to pay and what they can charge customers remains wide, continuing to compress profit margins across most sectors. Profit expectations recovered from -13.3 to +2.0, but the underlying squeeze is evident.
Wage intentions were broadly steady and remain below pre-conflict levels, which ANZ Research said is consistent with a soft labour market and firms limiting cost increases where possible. No clear evidence of second-round inflation effects has emerged yet, though the bank cautioned it is early to draw firm conclusions. Freight disruption data, reintroduced to the survey this month, flagged emerging stress in retail inbound and manufacturing outbound shipping channels.
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The bounce in confidence is real but narrow, and the cost picture offers little comfort for the RBNZ. With cost expectations holding at 90.4% and agriculture hitting 100%, the inflation pipeline remains pressurised even as headline inflation expectations eased slightly. The gap between what firms expect to pay and what they can charge continues to compress margins rather than feed through cleanly to prices, which complicates the inflation signal. Wage intentions were little changed and remain below pre-conflict levels, giving the RBNZ’s monetary policy committee limited evidence of second-round effects so far, though ANZ noted it is early days
