New Zealand business confidence 2025

With a return to the world of work for many this week, data has been released relating to recent retail spend and current business confidence. Economists have also opened their laptops to begin sharing early predictions on how this year will shape up and what factors looks set to influence financial flow.

It was a soft end to the year for many New Zealand retailers, reports Westpac. The bank's retail tracker showed spending on Westpac issued credit and debit cards was up just 2% in December compared to the previous year. "While it’s encouraging that spending is rising, that’s still a very muted gain, especially given the large increases in operating costs that many retailers have faced over the past year. In addition, with New Zealand’s population increasing by about 1% last year, it also points to very limited growth in per-capita spending levels," the bank summarised on January 16.

The latest NZIER Quarterly Survey of Business Opinion (QSBO), released on January 14, showed increased business confidence in the final quarter of 2024. It reported that a net 9% of firms expect an improvement in general economic conditions over the coming months on a seasonally adjusted basis. This contrasts with the net 4% of firms that had felt downbeat about the general economic outlook in the previous quarter.

Despite the continued improvement in business confidence, and although sentiment has improved and there are expectations of a recovery in activity, firms remained cautious about hiring and investment. A net 17% of firms reduced staff numbers in the December quarter. A notable proportion of firms intend to reduce investment in buildings, and plant and machinery over the coming year. Firms look to be holding off on investment and hiring until they have more conviction about a sustained improvement in demand in their own business.  

Tumultuous times?

Westpac Chief Economist Kelly Eckhold predicts, "2025 promises to be a tumultuous year. As we go into it, we see markets primed to reflect the consequences of the RBNZ continuing along its unusually explicit path of frontloading policy easing. The RBNZ’s strongly-signalled 50bps OCR cut in February seems likely to be delivered, especially given that astonishingly weak GDP data for Q2 and Q3 2024.

"We see six key issues as being important in determining the RBNZ’s course over 2025."

1. Economic response to the significant easing that has occurred.
2. Will the RBNZ over-ease?
3. The global economic backdrop.
4. The durability of the recovery in the terms of trade.
5. The labour market outlook.
6. Will the Government pivot from fiscal austerity to a growth agenda?

Important data being shared this week on building consents, the labour market, selected price indices and house prices, will provide further clues to the economic lay of the land as New Zealand returns from its collective beach break. 

"With inflation well within the target range, the Government appears to be shifting its focus towards a growth agenda," says Eckhold. "Efforts at fiscal consolidation have managed to control spending growth this year, but the simultaneous granting of tax cuts means that there has been no improvement in the operating balance (especially with weak economic growth weighing on revenues). Treasury forecasts still assume austerity in spending that may prove unrealistic if the Government wants to encourage growth."

Franchize Consultants' Dr Callum Floyd is also currently conducting the annual Franchising Confidence Index survey with results due out in February. So watch this space for more franchise specific confidence data coming to a screen near you next month.

 

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