Businesses still feeling winter chill, confidence surveys show

A windy and stormy day in Auckland. Will the economic outlook improve? Photo / NZME

• Business confidence rose 2 points in August, with 50% expecting better conditions, ANZ reports.
• However, firms’ own activity expectations fell 2 points to 39%, indicating lingering concerns.
• MYOB found 39% of SMEs expect economic decline, reflecting inflation and consumer spending worries.

Two business confidence surveys released today paint a mixed picture of the prospects for a renewed economic recovery.

Business confidence lifted two points in August to a net 50% expecting better business conditions, according to the ANZ Business Outlook for August.

However, while there was an improvement in top-line confidence, firms’ expectations for their own activity were gloomier, with those expecting an improvement down 2 points to a net 39%.

“This month’s survey is consistent with the RBNZ’s updated view that the economy needs a little more support to head off downside risks,” said ANZ chief economist Sharon Zollner.

“It’s too early to judge the confidence impacts of this month’s shift in stance, but our view is that it will shore up the recovery that is now under way,” she said.

Meanwhile, a survey for small and medium businesses commissioned by accounting software firm MYOB found that 39% of business owners and decision-makers polled expect the economy to decline over the next 12 months, while 36% believed it would improve.

This was a sizeable change from the first quarter of this year, when a higher proportion of SMEs (46%) polled for the MYOB Business Monitor said they expected the economy to pick up in the 12 months to March 2026, versus those (32%) who were expecting a decline.

The results suggested that confidence in the New Zealand economy among small and mid-sized enterprises (SMEs) had taken a knock, as inflation concerns and restricted consumer spending drive a downward shift in sentiment compared with earlier in the year, MYOB said.

“Following the ‘survive to 25’ narrative that surfaced last year and with the Reserve Bank making a few cuts to the Official Cash Rate, businesses and consumers alike were hopeful that 2025 might offer a reprieve from the difficult years it followed,” MYOB chief customer officer Dean Chadwick said.

“However, while winter is a notoriously challenging trading period for local enterprises, there’s been a gradual shift in mood and sentiment over the past several months around the local economy. While bright spots have appeared and we can see Kiwi businesses are taking action to strengthen their bottom lines, our insights suggest further action is needed to spur economic recovery.”

The ANZ Business Outlook results back up the view that winter saw a stalling of the economic recovery.

“Forward-looking activity indicators saw a mix of rises and falls in August”, Zollner said.

“Reported past activity (the best indicator of GDP in the survey) eased further and remains negative for retail, construction and manufacturing.

Past own activity fell 5 points to +1, while past employment rose 1 point to -12.

“Reported past employment remains soft for every sector. The construction sector in particular appears likely to be shedding jobs again,” Zollner said.

“The pain from previous weakness continues to percolate, showing up this month particularly in the sharp drop in reported employment in the construction sector.

“The recovery will unfortunately not come soon enough for some.”

One positive was that inflation indicators fell: the net percentage of firms expecting to raise prices in the next three months fell 1 point to 43% and those expecting cost increases fell 2 points to 74%.

One-year-ahead inflation expectations eased slightly to 2.6%.

“Inflation indicators suggest the risk of the current inflation bump becoming persistent are contained,” Zollner said.

Past and expected wage growth also both eased: past wage growth from 2.5% to 2.1% and expected wage growth from 2.5% to 2.4%.

“That’s disinflationary and certainly won’t do anything to bring about the lift in consumption that the RBNZ now wants to see,” Zollner said.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.