NZIER’s QSBO shows continued lift in business confidence, Quarterly Survey of Business Opinion - April 2025

New Zealand Institute of Economic Research (Inc) 
Media release, 8 April 2025

NZIER Quarterly Survey of Business Opinion 
Embargoed until 10 am 8 April 2025

The latest NZIER Quarterly Survey of Business Opinion (QSBO) showed a further lift in business confidence in the first quarter of 2025. A net 23 percent of firms expect general economic conditions to improve over the coming months on a seasonally adjusted basis, up from the net 9 percent in the previous quarter. 

However, the measure of firms’ own trading activity continued to suggest weak demand, with a net 21 percent of firms reporting a decline in activity in their own business in the March quarter. Similar to the previous quarter, there was a contrast between firms experiencing weak demand and expecting an improvement in the next quarter.

Despite the optimism about the outlook ahead, the continued weakness in demand is still driving caution when it comes to hiring and investment. A net 17 percent of firms reduced staff in the March quarter, and a small proportion of firms intend to reduce staff numbers in the next quarter. Also, firms are planning to reduce investment in buildings, plant and machinery. This reflects the fact that firms are still holding off on hiring and investment until they have more conviction about a sustained recovery in demand.

The building sector is no longer the most upbeat

Across the sectors surveyed, the building sector was no longer the most upbeat sector. A net 6 percent expect an improvement in the general economic outlook for the coming months, which was quite a noticeable drop from the 29 percent of building sector firms feeling positive in the December quarter. Continued weak demand, as reflected by reduced new orders and output, is weighing on confidence in the building sector. 

The less upbeat mood in the building sector likely reflects the softer pipeline of construction. The architects’ measure of activity in their own office points to an easing pipeline of construction work over the coming year. Expectations of a recovery in the pipeline of housing and commercial construction work over the next 12 to 24 months have been pared back relative to the December quarter, and architects now expect a decline in Government construction work over this longer-term timeframe.

The retail sector is now the most upbeat of the sectors surveyed, with a net 24 percent expecting an improvement in the general economic outlook for the coming months. This was despite the declines in new orders and sales in the March quarter. Cost pressures in the sector also intensified, which likely reflects the impact of the lower New Zealand dollar in raising the price of imported goods. Meanwhile, there was a lift in the proportion of retailers raising prices over the March quarter. It appears that retailers are hanging on in anticipation of improved demand ahead and have been able to increase prices.

Services sector firms are also feeling more positive about the outlook ahead despite continued soft demand. This optimism is likely to be supported by the widespread expectations of a continued decline in interest rates over the coming year. However, the services sector is also facing intensifying cost pressures, while the soft demand weighs on the sector’s pricing power. Meanwhile, the manufacturing sector is cautiously optimistic. Domestic demand remained particularly weak in the March quarter, likely reflecting the soft construction activity. Despite an improvement in pricing power and easing cost pressures in the manufacturing sector, the sector’s profitability deteriorated further in the March quarter. 

Cost pressures intensified

The latest NZIER QSBO showed mixed results for costs and pricing indicators. Cost pressures have intensified, particularly in the retail sector. The lower New Zealand dollar is likely to be a key contributor to this, given the increased costs of imported goods. Meanwhile, the proportion of firms that raised prices in the March quarter remained historically low at 8 percent, given that weak demand continues to limit the pricing power of firms. 

Nonetheless, inflation should be contained in the New Zealand economy, given the broad easing in capacity pressures. Capacity utilisation across builders and manufacturers eased in the March quarter. The continued dominance of firms reporting a lack of sales as the primary constraint on their business suggests that weak demand remains the key concern. 

For further information, please contact:
Christina Leung
Deputy Chief Executive (Auckland) & Head of Membership Services 
Ph +64 21 992 985 | Email christina.leung@nzier.org.nz 

Background

The New Zealand Institute of Economic Research has conducted its Quarterly Survey of Business Opinion since 1961. It is New Zealand’s longest-running business opinion survey. Each quarter we ask around 10,000 firms about whether business conditions will deteriorate, stay the same, or improve. The responses yield information about business trends much faster than official statistics and act as valuable leading indicators about the future state of the New Zealand economy. Long term series derived from the survey are held at NZIER and are available to NZIER members via our website at www.nzier.org.nz.