NZ Business Confidence Rebounds, but RBNZ Inflation Worries Persist

Firms stayed cautious on capacity. A net 10% reduced staff numbers during the quarter, and a net 1% expect further declines in employment over the next three months. Investment intentions were weak as well, with a net 3% planning to cut spending on buildings, plant and machinery over the coming year.

The survey period ended before the latest escalation in US-Iran tensions and the renewed surge in oil prices. That suggests hiring and investment plans could face additional pressure as geopolitical uncertainty intensifies ahead of New Zealand's general election in November.

More concerning for the Reserve Bank of New Zealand, the survey showed a renewed build-up in inflation pressures. Firms reporting higher costs rose from a net 37% to more than half. The share able to pass those costs through to customers climbed to a net 41%. Cost pressures were most visible in the building and retail sectors, though weak construction demand continued to limit pricing power in parts of the economy.