By Lucy Craymer
WELLINGTON, Jan 13 (Reuters) – New Zealand’s business confidence in the fourth quarter improved and is now at its highest level since March 2014, a private think tank said on Tuesday.
A net 48% of firms surveyed expected general business conditions to improve compared with 18% optimism in the previous quarter, the New Zealand Institute of Economic Research’s quarterly survey of business opinion showed.
Christina Leung, Principal Economist at NZIER said in a press conference that the survey indicated that lower interest rates were finally starting to have an impact on the economy and the recovery was starting to gain traction.
“The lift in sentiment was widespread across all sectors and regions,” Leung said.
On a seasonally adjusted basis, 39% expected business conditions to improve versus 17% optimism recorded in the previous period. The survey’s measure of capacity utilization rose to 89.8%, from the previous quarter’s 89.1%.
Leung added the survey suggests that inflation pressures remain contained.
New Zealand’s economy returned to growth in the third quarter but has contracted in three of the last six quarters. Economists and politicians are forecasting that economic growth will pick up over the coming year.
Leung added the survey suggests labour shortages are starting to emerge in pockets of the economy including in the services, manufacturing and building sectors.
New Zealand’s central bank has cut the official cash rate by 275 basis points since August 2024 to try and boost the flagging economy. A more buoyant economy will support the idea that the central bank may need to increase the cash rate earlier that is current forecast track suggests.
“With demand starting to recover but inflation remaining contained, we expect no further OCR cuts in the monetary policy cycle. We forecast the OCR to trough at 2.25% until the Reserve Bank of New Zealand commences increasing the OCR in the second half of 2026,” Leung said in a statement accompanying the data release.
(Reporting by Lucy Craymer; Editing by Chris Reese and Nick Zieminski)
