NZ business confidence rises to +53 as pricing intentions hit highest since May
The New Zealand economy is showing resilience amidst rising inflation expectations, as signaled by the latest ANZ Business Outlook survey. With business confidence rising to +53 and a significant 52% of firms planning to raise prices—the highest since May—the Reserve Bank of New Zealand (RBNZ) has little incentive to pivot from its current tightening trajectory. Per the full note , the link between business sentiment and crude prices remains crucial, particularly with ongoing geopolitical tensions in the Middle East that could trigger volatility in oil markets, impacting the NZD's strength and overall economic outlook.
What the desk is arguing
The latest ANZ Business Outlook survey indicates that New Zealand's business confidence is recovering, with the headline figure at +53, despite heightened inflation pressures at a stable 3.3%. This upward trend supports a sustained hawkish stance by the RBNZ as they monitor pricing intentions that are increasingly robust. Per the full note , the anticipated average price increases have reached 1.9%, while significant growth in services export intentions ties into the currency's performance.
The data reflects a growing resilience in the New Zealand economy, demonstrated by a notable improvement in past activity readings to +15, with all sectors contributing positively. The RBNZ's view is further reinforced as cost expectations remain elevated at 82%, suggesting that businesses are prepared for continued inflationary pressures. This sentiment translates into modest support for the New Zealand dollar going forward.
Notably, the desk sees this as an opportunity for NZD strength against adverse oil shocks, especially given that the last oil crisis had a far less pronounced impact on business sentiment than anticipated. The alternative read—that the current price environment could crush demand—seems less applicable as the data suggests a robust economic backdrop that could absorb short-term shocks.
Where it sits in our coverage
Our current consensus target for the NZD stands at 1.075, with ranges suggesting a possible high of 1.12 from some firms and a low of 1.04. Specific targets from other firms include the following:
This reflects a slightly bullish stance on the New Zealand dollar overall, aligning with the positive dynamics observed in the ANZ report. jpmorgan is notably aligned with our bullish positioning, while bofa holds a contrary view at the lower end of the spectrum.
How other firms see it
Firms such as jpmorgan and citi appear optimistic regarding the NZD, supporting the narrative of resilience in the face of oil price fluctuations. Meanwhile, bofa offers a contrasting perspective, warning of potential downturns should inflation rise unchecked.
Traders should also keep an eye on inflation-linked instruments and proxy pairs like AUD/NZD, which may reflect shifts in both regional sentiment and RBNZ policy outlooks indirectly as inflation data develops.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01NZ business confidence rises to +53 amid strong pricing intentions
- 0252% of firms plan to raise prices, highest since May
- 03RBNZ remains unlikely to ease tightening stance in the near term
Market implications
With the NZD showing resilience against potential oil price shocks, traders should monitor cross-currency movements, particularly NZD/AUD, for potential breakout opportunities. The RBNZ's policy direction remains pivotal, with inflation expectations shaping trader sentiment as the market anticipates their next moves.
Risks to this view
Any escalation in geopolitical tensions causing a spike in oil prices could undermine NZD's current strength, as evidenced by the fragile correlation noted in ANZ's report. Additionally, if inflation readings were to unexpectedly rise beyond current expectations, this could prompt a reevaluation of the RBNZ's tightening path and create volatility in the NZD.
Firmer pricing intentions and inflation expectations stuck around 3.3% give the RBNZ little reason to ease off its tightening. The resilient activity readings also undercut any argument that the oil shock is crushing demand. For the New Zealand dollar, that is a modest support, though the currency’s weakness is itself feeding the services export boom.
The oil link remains the main swing factor: ANZ’s data shows business sentiment tracking crude closely this year, so any renewed spike in prices tied to the Iran conflict would be the biggest threat to this resilience. --- New Zealand business has taken the latest oil shock on the chin far better than it took the last one, but rising price plans mean the RBNZ will be watching just as closely as the bosses. Summary: ANZ business confidence rose 1 point to +53 in October, while expected own activity eased 2 points to +46 Reported past activity rose 4 points to +15, with all sectors positive A net 52% of firms expect to raise prices, up 4 points and the highest since May, and the expected average increase rose to 1.9% Cost expectations held at a net 82%, and inflation expectations were steady at 3.3% Services export intentions hit a 25-year high, helped by the weak New Zealand dollar ANZ said the second-quarter confidence shock has not been repeated despite the renewed rise in oil prices New Zealand business confidence edged up in October and firms’ plans to raise prices climbed to their highest since May, the ANZ Business Outlook survey showed, suggesting the economy is weathering the renewed jump in oil prices better than many had feared. Headline business confidence rose 1 point to +53, while expected own activity, which ANZ regards as the more reliable guide to the economy’s direction, eased 2 points to a still-solid +46.
Reported past activity, which compares current trading with a year earlier, improved 4 points to +15, with every sector in positive territory. Price pressures were mixed but leaned higher. A net 52% of firms expect to raise prices over the next three months, up 4 points, and the average expected price increase rose to 1.9%, the highest since June.
Cost expectations held at a very high net 82%, while one-year-ahead inflation expectations were steady at 3.3%. ANZ noted that cost expectations have stayed contained despite higher fuel prices, but cautioned that firms are estimating increases from an already inflated starting point. Among the other details, services firms’ export intentions jumped to their highest in 25 years, which ANZ linked to the weak New Zealand dollar, with tourism operators reporting strong forward bookings.
Investment intentions slipped to +18 from +23, and employment intentions held at around +17. Wage expectations of around 2.8% suggest only marginal upside risk to the Reserve Bank of New Zealand’s wage forecasts, according to ANZ. Wellington recorded the highest regional confidence, while Canterbury was the lowest.
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