NZIER’s QSBO shows a strong rebound in confidence as recovery starts to gain traction

New Zealand Institute of Economic Research (Inc) 
Media release, 13 January 2026
NZIER Quarterly Survey of Business Opinion 
Embargoed until 10 am 13 January 2026

The latest NZIER Quarterly Survey of Business Opinion (QSBO) showed a strong lift in business confidence in the final quarter of 2025. A net 39 percent of firms expect better general economic conditions over the coming months on a seasonally adjusted basis. This was a substantial increase from the net 17 percent expecting an improved general economic outlook in the September quarter, and business confidence is at the highest level since March 2014. 

There was also a marked improvement in firms’ own trading activity, with only a net 3 percent of firms reporting a decline in activity in their own business in the December quarter on a seasonally adjusted basis. Although the gap between business confidence and firms’ own domestic trading activity remains, the latest results suggest that New Zealand’s economic recovery is starting to take shape as the effects of lower interest rates flow through to the broader economy. 

Given these positive developments, firms’ hiring and investment intentions have increased. A net 5 percent of firms increased staff numbers in the December quarter, and a net 22 percent are planning to hire in the next quarter. A net 11 percent of firms plan to increase investment in buildings over the coming year, while a net 7 percent plan to increase investment in plant and machinery. This contrasts with the negative investment appetite reported by firms in the September quarter. 

There are also early signs that spare capacity in parts of the New Zealand economy is reducing. This is reflected in the NZIER QSBO labour market indicator, which showed a small proportion of firms reporting it was more difficult to find skilled workers in the December quarter. Meanwhile, firms continue to report it being easier to find unskilled workers.

The lift in sentiment was broad-based across the sectors

Confidence rebounded in all sectors surveyed in the QSBO. In particular, manufacturing is now the most optimistic sector, with a net 56 percent of the manufacturers surveyed expecting better times ahead. This contrasts with it being the least optimistic sector in the September quarter. This lift in manufacturers’ confidence appears to be supported by increased domestic and export demand in the December quarter. Although costs remained high, manufacturers reported improved profitability for the quarter. 

The building sector is feeling much more upbeat about the outlook, with over half of the firms surveyed expecting general economic conditions to improve in the coming months. However, actual demand remained soft, with building sector firms continuing to report reduced new orders and output in the December quarter. The measure of architects’ work in their own office also reflects weak construction demand, with architects expecting a reduced pipeline of housing, commercial and Government construction work over the coming year. The longer-term outlook is more positive, with expectations of recovery in the pipeline of housing and commercial construction work for the next 12 to 24 months. 

This soft construction demand further reduced the pricing power of building sector firms, which resulted in a further deterioration in building sector profitability. The continued softening in the building sector’s cost and pricing indicators suggests construction cost inflation will remain low in the near term. 

Sentiment in the retail and services sectors also rebounded. For retailers, although domestic sales were weak in the December quarter, new orders picked up, and retailers feel hopeful about a recovery in demand over the coming months. Although the proportion of retailers whose prices increased in the December quarter rose, profitability remained weak as cost pressures intensified. 

As for the services sector firms, the lift in their confidence appears to have been supported by a pick-up in demand and expectations of a further decline in interest rates. Against this backdrop of improved confidence and demand, some services sector firms increased staff numbers in the December quarter. Nonetheless, profitability in the services sector remained subdued.

Cost and pricing indicators remain contained

Cost and pricing indicators suggest inflation pressures in the New Zealand economy remain broadly contained in the December quarter. Cost pressures eased, with a net 37 percent of firms reporting higher costs in the December quarter. Meanwhile, there was a small pick-up in the proportion of firms that raised prices in the quarter. However, the building sector was the exception across the sectors. A net 31 percent of building sector firms reported they had cut their prices in the December quarter in the face of continued weak construction demand.

These developments suggest spare capacity remains in the New Zealand economy, especially in construction. This spare capacity is keeping inflation pressures in check. With demand starting to recover but inflation remaining contained, we expect no further OCR cuts in this monetary policy cycle. We forecast the OCR to trough at 2.25 percent until the Reserve Bank of New Zealand commences increasing the OCR in the second half of 2026.  

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.