Residential builders giving up on recovery any time soon, says ANZ

Thursday, 31 July 2025

Residential construction has “tanked”, ANZ says.

Business confidence has held up in ANZ’s latest monthly survey, but firms’ assessment of their own trading and employment activity remains very subdued, the bank warned.

A net 48% of businesses polled by the bank expect economic conditions will have improved in a year’s time, up two percentage points from last month.

But that is in the context that many are clearly experiencing tough times now.

“The most noteworthy move was a tanking of residential construction activity expectations to the lowest level in a year,” ANZ chief economist Sharon Zollner said.

“Economy-wide, firms continue to experience soft demand. Reported past activity lifted four points but remains negative for retail, construction and manufacturing.

“In contrast, reported past employment is in the red for every sector.”

A silver-lining was that expectations of future inflation also remain subdued.

At Steam and Sand in Porirua, Holly Harding has made the upsetting decision to let five staff go. She says the construction downturn is severe, and despite talk of 'hope' from the Government, little work is coming through the door.

“Inflation expectations remain very stable. Firms on average expect costs to rise 2.4% over the next three months, while they expect to raise prices by 1.4% over the same period. Past and expected wage growth is just 2.5%,” ANZ said.

The bank’s take was that many firms continued to find the going tough, Zollner said.

“The past activity measures show a very wide range of experiences across different sectors, with agriculture storming ahead but construction and retail reporting a significant renewed slump.

“It appears residential builders are giving up on a recovery any time soon.”

A monthly measure of economic activity published by Stats NZ this week suggests there was a slight up-tick in June, after a drop in May, but only to a still-low level.

The New Zealand activity index is derived from several short-term indicators such as data on job listings, card spending, truck movements, electricity generation, job-seeker numbers and business surveys.

A Reserve Bank model of economic activity dubbed Kiwi-GDP that is updated each week is meanwhile currently forecasting that Stats NZ will next report the country’s GDP declined by about 0.27% in the three months to the end of June.

The modelling, which appears roughly in line with forecasts from bank economists, would represent a strong reversal from the 0.8% GDP growth recorded in the first three months of the year.