New Zealand business confidence rises despite inflation risks

New Zealand business confidence rose significantly in the September quarter, with a net 40% of firms expecting improved economic conditions, up from 14% in the previous quarter. This optimism was observed across all sectors, led by retail and building, even as actual domestic trading activity remained flat or slightly weaker.

However, economic forecasts suggest persistent challenges. ASB Bank predicts the Reserve Bank of New Zealand will implement two more Official Cash Rate hikes to 3.25% before Christmas due to stubborn inflation. Rising fuel prices, driven by international conflicts, are acting as a major headwind and a potential inflation shock.

While the economy has continued to expand, growth remains narrow. Analysts note a gap between high business optimism and actual order books, with rising oil prices and a weaker New Zealand dollar expected to keep inflationary pressures elevated for an extended period.