NZ business confidence eases from record highs as activity holds firm, inflation lifts

Business confidence remains exceptionally strong despite a pullback, but rising inflation and wage signals are emerging as a key risk.

Summary:

• New Zealand business confidence eased in January but remains at extremely elevated levels, according to ANZ’s latest survey.

• Activity indicators point to a solid Q4 GDP outcome, with experienced activity and employment improving across most sectors.

• Inflation signals are re-emerging, with pricing intentions and cost expectations rising to multi-year highs.

• Wage pressures are picking up modestly, with more firms reporting wage increases and higher expected wage growth.

• ANZ says the recovery looks intact, but inflation risks may complicate the RBNZ policy outlook if pressures persist.

New Zealand business confidence pulled back in January from December’s 30-year high but remains historically strong, according to the latest ANZ Business Outlook survey, as activity indicators stayed elevated while inflation pressures showed signs of re-emerging.

ANZ said headline business confidence fell 10 points to 64, following December’s surge to 74, a level the bank noted was unlikely to be sustained. Expected own-activity also eased, dropping nine points to 52, though ANZ stressed this reading remains very strong by historical standards. Measures of experienced activity continued to signal momentum in the economy, with past activity at its second-highest level since August 2021 and past employment turning positive across all sectors for the first time since late 2022.

The survey suggests the economic recovery that gained traction late last year has largely carried into early 2026. ANZ said reported past activity — a key lead indicator for GDP — points to the potential for a solid fourth-quarter growth outcome, with strength broadly based across sectors.

However, inflation indicators were less encouraging. The net proportion of firms expecting to raise prices rose sharply to 56.5%, the highest since March 2023, while numerical pricing intentions climbed to 2.1%, a two-year high. Cost expectations also continued to edge higher, particularly in construction and retail, and one-year-ahead inflation expectations lifted to their highest level in 15 months.

Wage pressures are also beginning to stir. Expected wage growth rose to 2.8%, while the share of firms reporting wage increases over the past year climbed to 72%, the strongest since April 2024.

ANZ said the combination of resilient activity and rising inflation signals presents a mixed picture. While momentum remains intact despite higher interest rates, the bank warned that persistent pricing pressures could bring forward expectations for tighter monetary policy if they translate into official inflation data.