Business confidence jumps to highest level since 2014

Tuesday, 13 January 2026

The gap between sentiment and their actual experience to date has increased.

Business confidence jumped sharply in the final three months of last year to the highest level since 2014, and a large number of firms are expecting to start hiring again in the coming months, according to a closely watched business survey.

However, not all economists appear ready to take that entirely at face value.

The Quarterly Survey of Business Opinion (QSBO) published by the New Zealand Institute of Economic Research reported that a net 39% of firms expected economic conditions to improve over the next six months.

That was an increase from 17% expecting better conditions when polled in the September quarter.

A net 5% of firms said they had increased staff numbers in the December quarter and a net 22% said they planned to do so in the current quarter.

NZIER said the improvement in sentiment was broad-based, with manufacturers the most optimistic and the building sector also “feeling much more upbeat about the outlook”.

ANZ senior economist Miles Workman said the survey result was “broadly consistent” with its own business outlook.

“The economy is improving, spare capacity is being eroded and disinflationary pressures are abating. Economic activity is on the up, and that’s translating into business investment and hiring.”

Workman remained of the view that the Reserve Bank would hold the Official Cash Rate at 2.25% when it releases its first monetary policy statement of the year, next month.

The jump in business confidence was reported on the same as disappointing retail sales figures.

The QSBO has previously shown some false dawns and the gap between business sentiment and their assessment of their own business’ activity has widened.

A year ago, a net 9% of businesses expected the economy to improve over the first half of last year, whereas GDP actually fell slightly over the period.

Despite the increased optimism, the research firm reported that a net 3% of firms still experienced a decline in their own business activity in the December quarter.

The survey result was published on the same day retail spending data released by Worldline indicated Kiwis reduced their spending on discretionary items in December.

Retail NZ chief executive Carolyn Young said the spending figures showed “just how tough the trading environment continued to be for retail”, and that consumer confidence was not yet back to where it needed to be.

BNZ research head Stephen Toplis said he was “moderately, and happily, surprised” by the strength of the QSBO, but sounded a small note of caution.

“At face value it shows that momentum in New Zealand’s economic recovery is gaining a real head of steam and, accompanying that, inflationary pressures are already building in a meaningful way.”

The surprise was “not so much about the extent of the moves but that they are occurring a little faster than we had anticipated”, he said.

“Or are they? The lag between expectations and out-turns seems to have lengthened this economic cycle, and we suspect this will remain the case, so we will not be scurrying to raise our growth forecasts at this juncture.”

NZIER principal economist Christina Leung said firms were more positive about investment and hiring, and more firms were reporting difficulties finding skilled staff.

“We are starting to see pockets of labour shortages. So when asking firms how easy it is to find labour, we are seeing that a net 2% of firms are reporting that they're finding it harder to find skilled workers.

“It does look to be the case that some signs of labour shortages are starting to emerge.”