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NZ Business Confidence Stabilizes Amid Inflation Fears

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  Published in Business and Finance on Friday, January 30th 2026 at 9:42 GMT by The New Zealand Herald
      Locale: NEW ZEALAND

Auckland, January 30, 2026 - New Zealand business confidence appears to be stabilizing, but emerging inflationary pressures are casting a shadow over the economic outlook, according to the latest ANZ Business Outlook survey released today. The January survey indicates a slight easing of pessimism among businesses, though confidence remains in negative territory.

The overall confidence reading for January came in at -18.1, a notable improvement from the significantly lower -27.8 recorded in December. While still indicating that more businesses are pessimistic than optimistic, the upward tick signals a potential pause in the downward trend experienced in recent months. However, this cautious optimism is tempered by a substantial rise in inflation expectations, creating a complex picture for policymakers and business leaders alike.

ANZ economist Miles Workman described the survey results as "mixed," highlighting that while the decline in confidence seems to have stalled, underlying economic conditions remain fragile. The survey revealed that the net percentage of firms anticipating improved general business conditions over the coming six months increased from -25% in December to -12% in January. This represents a positive shift, suggesting some businesses are beginning to foresee a brighter future.

However, Workman cautioned against reading too much into this improvement. "Firms' own activity outlooks are still soft," he noted, meaning that businesses are not yet anticipating a significant rebound in their own operations. More concerningly, the survey reveals a pronounced increase in inflation pressures. A striking 77% of businesses now expect prices to rise in the next quarter, up sharply from 62% in December. Looking further ahead, 60% anticipate higher prices over the next year, compared to 44% in the previous survey.

"The lift in inflation expectations is quite substantial and will be unwelcome for the Reserve Bank," Workman explained. The Reserve Bank of New Zealand has been battling to contain inflation for some time, and this renewed upward pressure will likely necessitate a careful reassessment of monetary policy. Increased inflation erodes purchasing power and can lead to a wage-price spiral, further complicating economic management.

The rise in inflation expectations is translating into weakened investment and hiring intentions. Businesses are becoming more hesitant to commit to long-term investments and are scaling back plans for new hires, reflecting concerns about the future cost of doing business and the potential for a slowdown in demand. This creates a self-reinforcing cycle, where reduced investment and hiring further contribute to slower economic growth.

Delving deeper into the survey, the proportion of firms reporting higher costs continued to climb, increasing from 60% to 65%. While sales also edged up, rising from 23% to 26%, the pace of cost increases is outpacing revenue growth, squeezing profit margins for many businesses. Workman emphasized that these cost pressures are pervasive, affecting businesses across all sectors and geographical regions of the country.

Despite the overall cautious outlook, Workman pointed out that own activity intentions remain "relatively solid," indicating that businesses aren't yet bracing for a severe economic downturn. This suggests a degree of resilience within the economy, but the growing threat of inflation cannot be ignored.

The ANZ Business Outlook survey provides a valuable snapshot of business sentiment and expectations. The current findings suggest that New Zealand's economy is navigating a challenging period, characterized by a delicate balance between stabilizing confidence and accelerating inflation. The Reserve Bank will be closely monitoring these trends as it seeks to steer the economy towards sustainable growth.