NZIER’s QSBO shows a further lift in business confidence despite soft activity

New Zealand Institute of Economic Research (Inc) 
Media release, 6 October 2026

NZIER Quarterly Survey of Business Opinion
Embargoed until 10 am 6 October 2026

The latest NZIER Quarterly Survey of Business Opinion (QSBO) showed a continued recovery in business confidence in the September quarter. A net 40 percent of firms expect a better general economic outlook over the coming months on a seasonally adjusted basis. This was a marked increase from the net 14 percent feeling positive in the previous quarter. However, when it comes to firms’ own domestic trading activity, a net 1 percent reported a decline in activity over the September quarter on a seasonally adjusted basis. 

The increase in optimism in the September quarter occurred despite renewed conflicts between the US and Iran, which have pushed global oil prices higher again. While the impact of developments in the Middle East on sentiment appears muted for now, ongoing uncertainties over geopolitical conditions and global oil supply remain a headwind for New Zealand’s economic recovery over the coming year.

Expectations of a recovery in demand have supported a turnaround in firms’ investment intentions, with firms planning to invest in buildings, plant and machinery over the coming year. This contrasts with firms’ caution regarding investment earlier this year. When it comes to hiring, a net 5 percent of firms reported that they had cut staff numbers in the September quarter, but a sizeable proportion of firms intend to increase staff numbers in the next quarter. 

Lack of demand remained the primary constraint for firms in the September quarter. Meanwhile, firms continued to report that it was more difficult to hire skilled workers in the September quarter, while only a small proportion of firms reported it being easier to find unskilled workers. Although demand remains soft overall, these developments point to signs that spare capacity in the New Zealand economy is dissipating. 

Optimism was widespread across sectors

Confidence lifted across all sectors surveyed, with the retail sector feeling particularly upbeat. A net 57 percent of retailers surveyed expect better general economic conditions over the coming months. This positive sentiment was despite declines in new orders and sales in the September quarter. Cost pressures remained intense for the retail sector, but weak demand meant retailers were unable to fully pass on higher costs by raising prices. These factors drove a deterioration in the retail sector’s profitability in the September quarter. 

The services sector was also feeling positive about the outlook ahead, despite reporting a decline in the volume of services and weak profitability in the September quarter. There were also widespread expectations that interest rates would rise over the coming year. More broadly, recent weakness in the retail and services sectors reflects the headwinds facing the New Zealand household sector. Higher energy prices and soft labour market conditions are weighing on households’ purchasing power. We expect higher interest rates to restrain household discretionary spending over the coming year as households’ mortgages come up for repricing and their repayments increase.

The building sector saw a sharp turnaround in sentiment in the September quarter, with a net 46 percent of building sector firms expecting an improved general economic outlook over the coming months, in contrast to their pessimism earlier this year. Against this backdrop was a marked improvement in demand, with building sector firms reporting increases in both new orders and output. A small proportion of building sector firms also increased their staff numbers over the quarter. Intense cost pressures and weak pricing power continued to weigh on the sector’s profitability in the September quarter. 

Despite a recovery in demand reported by building sector firms, the measure of architects’ work in their own office suggests a flat pipeline of housing construction work over the coming year and the next 12-24 months, and reduced pipelines of commercial and Government construction work. Overall, the outlook for construction activity is soft.

The manufacturing sector has become upbeat in the September quarter. Manufacturers continued to report increased domestic and export demand and remained optimistic about the demand outlook ahead. Meanwhile, profitability in the manufacturing sector deteriorated, as costs intensified over the quarter and the proportion of manufacturers able to raise prices decreased.

Cost and pricing indicators ease from high levels

The easing of the NZIER QSBO cost and pricing indicators from high levels suggests a reduced risk of higher fuel prices flowing through to broader inflation pressures. The proportion of firms reporting higher costs fell from a net 54 percent to a net 47 percent in the September quarter. The proportion of firms expecting higher costs in the next quarter also declined. Meanwhile, the proportion of firms that increased prices declined. Soft demand continues to limit the extent to which firms can pass on higher costs by raising prices.

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.