NZIER business survey turns positive for first time in almost four years

Economy / news

Business sentiment has risen to its highest level since 2021 despite weak demand in the Christmas quarter

14th Jan 25, 10:10am by Dan Brunskill

New Zealand businesses had a slow Christmas period but are expecting a happier New Year, according to NZIER’s quarterly survey of business opinion (QSBO), which showed general confidence had turned positive for the first time since June 2021.

The latest survey results showed a net 9% of firms expected economic conditions to improve in the coming months, up from 4% in the September 2024 quarter, despite 26% experiencing a decline in their own business activity during the final quarter of 2024.

NZIER deputy chief executive Christina Leung said this suggested the recent recession seen in Gross Domestic Product figures may have continued through the December quarter.

Firms included in the survey were the most positive about general economic conditions they had been in years despite a majority facing weaker demand in the run up to Christmas.

“Although sentiment has improved, and there are expectations of a recovery in activity, firms remained cautious about hiring and investment. A net 17% reduced staff numbers in the December quarter,” NZIER said in a media release.

The mood in the construction sector has improved most rapidly. A net 29% of building sector firms felt positive about the economic outlook, up from just 9% in the previous quarter. This sentiment was likely based on hopes lower interest rates will stimulate activity, as actual orders and output contracted.

Demand for retail and services was also weak during the quarter but both sectors saw a lift in confidence likely on the expectation that lower mortgage rates will give households more cash to spend in the future.

Sentiment in the manufacturing sector improved less than others. The lower Kiwi dollar likely supported demand for exports but high costs and weak pricing power continues to weigh on profitability.

Cost and pricing indicators show inflation continues to ease. The proportion of firms reporting higher costs fell to 35% in the quarter and the amount raising prices remained historically low at 10%.

“Weak demand continues to reduce capacity pressures, with in turn weighs on inflation pressures in the New Zealand economy. This is reflected by the continued dominance of the lack of sales which is reported by firms as the primary constraint on their business,” NZIER said.

Leung said there was nothing in the results to prevent another 50 basis point reduction to the Official Cash Rate at the Reserve Bank’s February meeting.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

41 Comments

by WestieAJ | 14th Jan 25, 10:17am 1736803058

If they don't believe it. How can they expect their creditors and lenders to believe it?

by J.C. | 14th Jan 25, 1:06pm 1736813171

You get it. Would also like to see how the question is posed. Is it binary? Is there an option for 'I don't know'? If so, how is that that answer represented?

Had a meeting with a management consultant type last week buzzing over an Ipsos survey showing unbridled optimism in ASEAN among nations (he had already come out with an explanation for the why people answered positively - just his reckons). Looking at the list, Japan and South Korea were at the bottom - Japan is always as the bottom. I asked the management consultant why Japan and SK were at the bottom hoping that he might mention cultural bias in how people answer questions.

by observer | 14th Jan 25, 2:32pm 1736818362

According to the QSBO report on the members section of the NZIER website, there are four response options to most questions: Up, Down, Same and N/A.

The net score is calculated as ((Up-Down)/(100-N/A)) x100. It's not clear what is done with the Same numbers.

by J.C. | 14th Jan 25, 3:31pm 1736821868

Net scores on expectations are a useful measure of aggregated expectations; nevertheless the obvious weakness is measuring 'confidence in expectations'. And what does N/A mean? If you're qualified to give your responses, you're likely to be a business leader. Expectations are 'applicable.'

by NZGecko | 14th Jan 25, 10:29am 1736803775

Pure Hopium to create the Copium.

It wont hold water, when the reality of empty pockets of the poor masses bites.

"The warp drive, canny take it any longer capin"

by Let me be Frank | 14th Jan 25, 10:29am 1736803770

The (hoped for) power of positive (public) thought.

by NZGecko | 14th Jan 25, 10:31am 1736803877

Yes.....just like the hopium drivel constantly spewing out of the Oneroof sewer pipe. It's all destined for the pit.

by Cote d'Azur | 14th Jan 25, 10:37am 1736804220

Happy New Year! 🥂

Or as usual another negative miserable year for the majority of commentators on this site!

NZ is on the comeback trajectory, despite the bizarre bitter people here who wish it to be otherwise!

Best wishes to all🥂

C.D.Z

by pigeonbox | 14th Jan 25, 11:15am 1736806534

Cheers Yvil 🥂

by Crazy Horse | 14th Jan 25, 11:25am 1736807158

@Cote d'Azur

NZD to USD Chart -10.55% (1Y)

I don't know where you get your streams of income from - but the above does not bode well for the average consumer.

As the price of Brent Crude in USD rises and the NZD falls, its a "double whammy' for petrol prices at the pump - all totally out of NZ Inc's control.

This will push NZ back into even more inflation and if they reduce interest rates, more money (DEBT) is created and NZ is back to more inflation and a bigger interest bill.

So as this is a financial website, can one ask your reasons for your optimism ?

by RookieInvestor | 14th Jan 25, 11:35am 1736807706

trumps return will lower the price of oil.

by Crazy Horse | 14th Jan 25, 11:38am 1736807907

You "hope" :)

by RookieInvestor | 14th Jan 25, 11:43am 1736808229

you asked for a reason, you now have it. Drill, Baby, Drill.

by Crazy Horse | 14th Jan 25, 12:27pm 1736810832

You keep the banks in clover Rookie ....:)

PS didn't know you had changed your moniker Cote d'Azur ?

by mfd | 14th Jan 25, 2:26pm 1736817986

Any drilling that starts today will have minimal impact during Trump's term.

by rastus1 | 14th Jan 25, 1:06pm 1736813219

No. Trump wants to increase US oil production. That cannot be done at current prices - which are largely based on cheap Gulf oil. US need a price of $90+.

i.e Trump is full of BS.

by Pa1nter | 14th Jan 25, 12:15pm 1736810108

Or as usual another negative miserable year for the majority of commentators on this site!

Everyone can have a bad day, week, month or year.

But if I allowed my mind to sit in a state of perma-doom, as I've seen for years on end here now, what a waste of a life that would be.

by Let me be Frank | 14th Jan 25, 2:31pm 1736818314

Observations of reality do not preclude the enjoyment of life.

Those expected to provide the positive influence are those least capable/enabled to do so.....irony?

by Pa1nter | 14th Jan 25, 2:39pm 1736818795

Observations of reality do not preclude the enjoyment of life.

Sure, but if the lens you're viewing life through is mostly focused on everything going into hell in a handcart, doesn't leave as much bandwidth to recognize how everything's mostly perfect.

by Let me be Frank | 14th Jan 25, 2:42pm 1736818963

I think the irony is reflected in the dichotomy of those positions.

by Pa1nter | 14th Jan 25, 3:35pm 1736822126

Both can be occuring at once.

It's very easy for the mind to pick out fault, and get fixated on that, whilst being totally blind to the majority of things that are just fine, if not more so.

Understandable on a fleeting basis, as new horrors come to light. But then there's people banging on about those same problems, day after day, year after year. If we took many commenters' repeated views as real, NZ is the most stinky-pooh, icky yuckiest tinpot dystopia, ever. When the reality is being a human in NZ in 2025, one of the most fortunate positions a human could hope to end up in.

by Let me be Frank | 14th Jan 25, 5:07pm 1736827671

"When the reality is being a human in NZ in 2025, one of the most fortunate positions a human could hope to end up in."

Only if you have a contrary point of reference....and the past is a foreign country. having said that, it is true that (at least) 30% of our population do indeed have a lived experience of a foreign county, though not necessarily from the same vantage point.

Meanwhile, reality for those required to 'optimism' may well see little to be enthused about.

by Pa1nter | 14th Jan 25, 10:30pm 1736847051

Only if you have a contrary point of reference....and the past is a foreign reference

It'd go for today and in the past.

Meanwhile, reality for those required to 'optimism' may well see little to be enthused about.

You'll likely wake up tomorrow

Nutrition won't be a problem

No one's likely to shoot or enslave you.

If you're of decent character, your life should involve at least a handful of rich, reciprocal relationships

Some of many realities that greatly outnumber the perilous ones. Being heavily weighted towards a focus on the deficits, particularly in a circular loop, is not "observing reality"

by Colin Cameron | 15th Jan 25, 9:48am 1736887721

Pa1nter So true every day above ground is a great day cause guarantee the first day in the ground is going to be a b.. ch

by linklater01 | 14th Jan 25, 3:35pm 1736822138

Cote d'Azur,

All I do is look at the published numbers and my reading of them makes me somewhat pessimistic, not because I want to be, but because that's what the numbers tell me. I hope I am wrong. Nothing would make me happier than to see a sustained, productivity led recovery, but right now, I struggle to see it.

by huttman | 14th Jan 25, 10:39am 1736804341

I have just done some calculation. my salary income dropped 6.81% since 21Q3 after inflation.

No wonder I feel poor.

by buyandhodl | 14th Jan 25, 10:42am 1736804534

We're coming back boys and girls.

Interest rates down.

Filled jobs starting to go up.

Fast track pipeline creating work in primary industries and construction.

Consumer confidence and business confidence turning positive again.

New harmless and wealthy trade partner (UAE + rest of M.E) who cannot pursue import substitution for our agri products in the desert.

Tax deductions seeping through the real economy

by J.C. | 14th Jan 25, 1:12pm 1736813548

New harmless and wealthy trade partner (UAE + rest of M.E) who cannot pursue import substitution for our agri products in the desert.

We're catching up to Vietnam. OK, they don't do kiwifruit, milk powder, and cherries. But they're an early mover compared to us. And they can also sell manufacturing.

The United Arab Emirates and Vietnam have signed a comprehensive economic partnership agreement (CEPA), the first free-trade agreement Vietnam has established with a Middle East country, the Vietnamese trade ministry said in a statement on Tuesday.

Under the CEPA, the UAE has committed to phasing out tariffs on 99% of Vietnam's exports, and Hanoi has pledged to remove tariffs on 98.5% of the UAE's exports .

https://www.reuters.com/world/vietnam-uae-sign-comprehensive-economic-p…

by interesting1234 | 14th Jan 25, 1:14pm 1736813663

Tax deductions seeping through the real economy

Personally I'd have to say tax deductions are getting put back into assets, or eaten by the rise in cost of living.

by kraken | 14th Jan 25, 10:48am 1736804920

I'll wait until 22 January for last quarter's CPI. It's a bit early to celebrate inflation coming down, we might start seeing it tick up again, just like everywhere else.

by rastus1 | 14th Jan 25, 10:50am 1736805028

To be expected! The competitors have gone broke leaving both the market and the survey!!

by MikeM | 14th Jan 25, 10:53am 1736805182

We're still seeing the effects of the rate cut dopamine hit. While I think we'll see a recovery, interest rates will need to fall further for this business optimism to materialize in the real economy.

by kraken | 14th Jan 25, 11:06am 1736805987

Last year's cuts might have been premature and a bull trap - time will reveal if a second wave of inflation is on the horizon.

by DonKerrBab | 14th Jan 25, 11:11am 1736806316

Seems to be a lot hanging on the historic assumption of the fact that lower rates will fire housing demand and consequently our NZ based “growth” Rates aren’t really that much lower and unemployment has only just started rising. IMHO I think this is a sugar rush reaction reflected in the surveys and after another quarter of weakness confidence could well fall away again. Can’t see fixed rates falling much in the near term with the structure of global yields having more impact from here than a tweak or 2 in the OCR. The weak NZD could help somewhat.

by HouseMouse | 14th Jan 25, 11:54am 1736808846

Yes pure hopium in terms of construction.

There will be more genuine hope if / when retail interest rates fall below 5%

by NZGecko | 14th Jan 25, 11:59am 1736809182

Close. They need to be below 4%.

3.4% is the overleveraged and spriukers medicinal need, as they are all sick as hell past 4%

by Pa1nter | 14th Jan 25, 12:22pm 1736810575

Yes pure hopium in terms of construction

Really not really.

A bunch of firms I interact with laid staff off end of 2024 financial year. 3 months later, they're regretting their decisions and lack of manpower.

There does look to be more activity in the pipeline this year, than the same time last year - although this time last year some crowds were still finishing projects conceived in the COVID era.

But super mixed bag. If your business was primarily related to greenfield subdivisions, maybe not a happy time. But plenty of optimism outside of that sector.

by HouseMouse | 14th Jan 25, 3:12pm 1736820761

Maybe Canterbury is an alternative universe?

Residential brownfields is generally still grim in Auckland at least

by Pa1nter | 14th Jan 25, 10:05pm 1736845545

You keep talking about Canterbury. Things do seem ok there, I don't live there.

I also have a lot of Auckland contacts, most seem pretty busy.

Not everyone is pessimistic in a downturn, and many downturns aren't as severe as most anticipate. So there's likely optimism out there (and there definitely is, and much of it's warranted), that things will improve or not be as dire as anticipated. More than solely hopium anyway.

by observer | 14th Jan 25, 2:31pm 1736818301

According to the QSBO report on the members section of the NZIER website, there are four response options to most questions: Up, Down, Same and N/A.

The net score is calculated as ((Up-Down)/(100-N/A)) x100. It's not clear what is done with the Same numbers.

by Let me be Frank | 14th Jan 25, 5:53pm 1736830413

It appears to me that the people being asked about sentiment should be the indebted. They are the cohort that determine whether credit will expand or not and I doubt that cajoling them with declarations of optimism from the creditors will make much difference to their outlook.....extra money in the pocket however may.