New Zealand Institute of Economic Research (Inc)
Media release, 21 April 2026
NZIER Quarterly Survey of Business Opinion
Embargoed until 10 am 21 April 2026
The latest NZIER Quarterly Survey of Business Opinion (QSBO) showed a drop in business confidence in the March quarter. Only a net 1 percent of firms expect better general economic conditions over the coming months on a seasonally adjusted basis. This was a decrease from the net 39 percent expecting a better general economic outlook in the December quarter. Firms’ own trading activity was flat on a seasonally adjusted basis, which is a slight improvement from the net 3 percent reporting a decline in activity in their own business in the previous quarter.
This NZIER QSBO was undertaken over the period of 6 March to 10 April, shortly after the US and Israel launched attacks on Iran, which sparked the restriction of ships through the Strait of Hormuz and the subsequent global supply chain disruptions and surge in fuel prices. A breakdown of responses over the survey period shows business sentiment continued to deteriorate as the US-Israeli conflict with Iran escalated and the Strait of Hormuz was closed. Although firms’ domestic trading activity remained stable in the March quarter, the ongoing US-Israel war against Iran poses a risk to the fragile recovery that had been taking shape in the New Zealand economy late last year.
The recent developments with the Strait of Hormuz shipping restrictions and fuel price surge have increased caution amongst firms, as reflected in firms’ hiring and investment intentions. A net 9 percent of firms reduced staff numbers in the March quarter, and a net 5 percent plan to reduce headcount in the next quarter. Regarding investment, a net 12 percent of firms plan to cut back on investment in buildings over the coming year, while a net 9 percent plan to reduce investment in plant and machinery. We expect the upcoming General Elections in November to add another layer of uncertainty.
Sentiment was mixed across the sectors in the March quarter. Building sector firms are the most downbeat, with a net 28 percent of the building sector firms surveyed expecting a deterioration in the general economic outlook over the coming months. This contrasts with the optimism amongst building sector firms in the previous quarter. This sharp drop in building sector sentiment reflects weaker demand, as a substantial proportion of building sector firms reported declines in new orders and output in the March quarter. This deterioration in demand has further reduced the pricing power of building sector firms. Along with intensifying cost pressures, the building sector experienced a further deterioration in profitability.
The measure of architects’ work in their own office also points to a weakening in construction demand. Architects expect a reduced pipeline across housing, commercial and Government construction work for both the coming year and the next 12 to 24 months. Rising construction costs from the Strait of Hormuz restrictions, rising fuel prices and disrupted global supply chains will likely weigh on the appetite for undertaking new construction projects.
In contrast, manufacturing remains the most upbeat sector surveyed, with a net 34 percent of manufacturers expecting an improvement in general economic conditions over the coming months. This optimism appears to have been supported in particular by stronger export demand in the March quarter, despite manufacturers reporting an easing in both cost and pricing pressures over the quarter, manufacturing sector profitability deteriorated.
The retail sector also remains hopeful about the outlook and demand over the coming months as both new orders and sales improved in the March quarter. The proportion of retailers who raised prices increased in the March quarter, but the profitability of the retail sector was still weak, given the intense cost pressures. Sentiment in the services sector also deteriorated, despite continued improvement in the volume of services. The reversal of the services sector’s confidence could be attributed to expectations of higher interest rates for the coming year.
The recent surge in fuel prices, as the US-Israel war with Iran escalated, has increased costs for households and businesses. However, the NZIER QSBO costs and pricing indicators suggest that inflation remains broadly contained in the New Zealand economy for now. The proportion of firms which faced higher costs remained steady at 37 percent in the March quarter, while the proportion of firms which raised prises picked up in the quarter. The building sector was the only sector to grapple with reduced pricing power and intensifying costs, given the weakening in construction demand and its exposure to global supply chain and fuel supply disruptions.
Overall, these latest results on the NZIER cost and pricing indicators suggest that the risk of persistently high inflation resulting from the disruptions caused by the US-Israel war with Iran is modest, but there is a high degree of uncertainty about how long the war will affect gas and oil supply chains and prices. We continue to pencil in for the Reserve Bank of New Zealand (RBNZ) to commence its tightening cycle with a first 25 basis-point OCR increase in July. Forward-looking inflation indicators, such as inflation expectations, will be a key influence on when this tightening cycle will begin.
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
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.