ANZ's April business outlook survey showed a sharp swing from optimism to pessimism, with inflation expectations rising and firms warning hiring and investment decisions may be paused.
ANZ's monthly business outlook survey showed a sharp reversal in sentiment in April, with the net confidence measure swinging from +32.5 in March to -10.6 — a move that puts pessimists in the majority for the first time in several months.
The bank's chief economist Sharon Zollner described the environment as a "wall of worry" for many firms, citing the oil price shock from the Middle East conflict as the primary driver of the shift.
The survey results are published on interest.co.nz.
What the survey shows
The movement in confidence was driven primarily by the agriculture sector, which recorded a reading of -48.6. Services held firmer at +18.6, while construction came in at +19.6.
Beyond the headline confidence reading, the survey pointed to several notable shifts:
Cost expectations jumped sharply. Costs are expected to rise 4.57 percent over the next three months, up from 2.99 percent the prior month — a significant month-on-month move that businesses say they are struggling to pass on through higher prices.
Inflation expectations rose. One-year ahead inflation expectations lifted to 3.8 percent from 3.1 percent, pulling further above the RBNZ's 1–3 percent target band.
Pricing intentions eased slightly. While cost pressures built, firms' pricing intentions — a proxy for how much they expect to be able to raise prices — dipped marginally in the month, suggesting many businesses are finding it difficult to fully pass on higher costs.
Hiring and investment may be deferred. Zollner noted that uncertainty itself tends to delay spending and employment decisions, independent of the actual economic conditions. "The uncertainty of the outlook will itself likely see some hiring and investment decisions put on ice until the outlook becomes clearer," she said.
Small businesses: improvement but with a caveat
Separately, Xero's Small Business Insights report for the March quarter showed small business sales rose 3.9 percent year-on-year — the same pace as the December quarter, indicating the improvement has been sustained, according to RNZ.
Retail trade was up more than 5 percent, and hospitality recorded its best quarter in nearly three years, up 4 percent. Construction sales also rose for the third consecutive quarter.
Xero country manager Bridget Snelling said the data showed households were becoming slightly more willing to spend on non-essentials, consistent with the effect of last year's interest rate cuts filtering through to consumer behaviour.
However, Snelling flagged that the broader macroeconomic context remains uncertain. "We are yet to see the most significant impacts of the ongoing conflict in the Middle East and how this impacts the cost of living in New Zealand," she said. "Rising fuel prices put pressure on both sides of the ledger — they lift costs for businesses while also weighing on consumer spending."
The macro context: Treasury scenarios
The ANZ survey results sit against a backdrop of elevated uncertainty about New Zealand's economic trajectory. Finance Minister Nicola Willis released Treasury modelling last week that sketched out three scenarios depending on the intensity of the oil price shock from the Middle East conflict. Under the worst case — scenario 3, with oil at US$180 per barrel — annual inflation would peak at 7.4 percent in the June 2026 quarter, compared with a baseline of 2.7 percent if the conflict does not escalate.
Even the base case, assuming no worsening of the Middle East situation, projects annual CPI inflation at 2.7 percent — at the top of the RBNZ's target band.
For now, the ANZ data suggests businesses are experiencing a genuine squeeze between rising costs and limited ability to pass them on — a combination that tends to compress margins and delay investment, regardless of what individual firms' order books look like in the short term.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.