New Zealand business confidence collapsed from +32.5 to -10.6 in April as cost expectations hit a three-year high, though wage and pricing intentions were steadier, offering the RBNZ limited reassurance. (
Summary:
- ANZ’s business confidence index fell from +32.5 in March to -10.6 in April, a swing of 43 points, though ANZ noted late-March responses were already averaging -22.5, suggesting some stabilisation since the initial shock
- Own activity outlook dropped from 39.3 to 19.6 in a broad-based fall across sectors, with retail the weakest at zero; profit expectations swung from +19.7 to -13.3, with agriculture the worst performer at -40
- Employment intentions turned negative for the first time since mid-2024, falling from +9.4 to -2.7, pointing to a softening labour market ahead
- Cost expectations for the next three months surged to 4.57% from 2.99%, the highest reading since May 2023, with the implied margin squeeze between expected costs and prices drawing comparison to 2022
- One-year inflation expectations rose to 3.81% from 3.08%, the highest since February 2024, with uncertainty around future inflation also increasing as measured by the interquartile range of responses
- Pricing intentions edged down slightly to a net 57.7% from 60.3%, and wage expectations for the next 12 months eased to 2.53% from 2.74%, which ANZ described as offering the RBNZ some reassurance
- Export intentions fell sharply from 15.2 to 1.1, with agriculture and manufacturing both well down; residential construction intentions dropped to 11.8 from 35.3, the lowest since July 2024
- Past activity, ANZ’s best GDP proxy within the survey, held relatively steady at 16.9, with manufacturing the standout performer at 31.2, possibly reflecting stockpiling ahead of anticipated price increases or supply shortages
New Zealand business confidence fell sharply in April, with ANZ’s headline index dropping 43 points from +32.5 in March to -10.6, as the cost shock flowing from the Middle East conflict weighed heavily on firms’ activity and profit expectations. The swing is stark, but ANZ Research cautioned that late-March survey responses, taken after the initial geopolitical shock, had already been averaging -22.5, making the April print a partial stabilisation rather than a fresh deterioration.
The detail across activity indicators was broadly weak. Own activity outlook more than halved from 39.3 to 19.6, with retail the softest sector at zero. Profit expectations swung from +19.7 to -13.3, with agriculture the hardest hit at -40 as input cost pressures bear down on farm-level margins. Export intentions fell from 15.2 to just 1.1, with significant declines in both agriculture and manufacturing. Residential construction intentions dropped to 11.8, the lowest reading since July 2024. Employment intentions turned negative for the first time since mid-2024, falling to -2.7 from +9.4, an early warning that the labour market may soften in the months ahead as firms defer hiring decisions until the outlook becomes clearer.
The inflation picture is the most consequential element for monetary policy. Cost expectations for the next three months surged to 4.57% from 2.99%, the highest reading since May 2023, and one-year inflation expectations rose to 3.81% from 3.08%, the highest since February 2024. ANZ noted that the gap between firms’ expected cost increases of 4.6% and expected price increases of 2.4% over the next three months implies a degree of margin compression similar to the squeeze experienced in 2022. Uncertainty around future inflation is also rising, complicating business planning and investment decisions across sectors.
The partial offset, and the data point the RBNZ will cling to, is that pricing intentions dipped slightly on a net basis and wage expectations eased to 2.53% from 2.74%. ANZ described the wage reading as reassuring from an inflation-fighting perspective, noting that contained wage-setting intentions reduce the risk of the cost shock becoming embedded in a wage-price spiral. Past activity, the survey’s most reliable GDP proxy, held relatively steady at 16.9, with manufacturing the standout at 31.2, a reading ANZ suggested may reflect firms stockpiling inputs in anticipation of tighter supply or higher prices later.
ANZ’s overall assessment, titled “a wall of worry,” was measured. The charts are ugly, the bank acknowledged, but many activity indicators came in above the levels implied by late-March responses, suggesting the initial confidence shock has partially dissipated. The RBNZ, which recently began an easing cycle and has held the OCR at 3.25%, faces a data environment that gives it little room to move confidently in either direction: growth indicators are softening while cost and inflation expectations are rising, a combination that argues strongly for the cautious, data-dependent approach the bank has signalled.
Reserve Bank of New Zealand Governor Anna Breman
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The headline swing from +32.5 to -10.6 is dramatic, but ANZ cautions against reading it at face value. Late-March responses, taken after the initial shock of Middle East developments, were already averaging -22.5, meaning the April print actually represents some stabilisation rather than a fresh lunge lower. The more policy-relevant signal for the RBNZ is in the inflation detail. Cost expectations for the next three months jumped to 4.57% from 2.99%, the highest since May 2023, while one-year inflation expectations rose to 3.81% from 3.08%, the highest since February 2024. Both sit uncomfortably above the RBNZ’s 1-3% target band. The partial offset is that pricing intentions edged down slightly and wage expectations eased to 2.53% from 2.74%, giving the RBNZ a small degree of reassurance that the cost shock is not yet feeding into a wage-price spiral
