New Zealand businesses are the most optimistic they have been in months. The numbers that measure what the economy actually did are pointing the other way, and the gap between the two is now wide enough to be the story in itself.
The ANZ Business Outlook survey for July, published on 30 July, put headline business confidence at 56.1, up from 36.6 in June. That is a 19 point jump in a single month. Firms’ expectations for their own activity over the year ahead rose to 49.3 from 36.9. Employment intentions almost doubled to 18.1 from 9.4, investment intentions lifted to 22.8 from 16.5, and export intentions rose 8.5 points to 26.6. Among manufacturers, export intentions reached their highest level since 2000.
ANZ chief economist Sharon Zollner described confidence and own activity expectations as sitting at “historically solid levels” and said manufacturers’ export intentions had gone “ballistic”, as reported by interest.co.nz. Confidence was up across the board, with agriculture at 81.0, retail at 67.3, construction at 54.0 and services at 48.1.
Households moved the same way a day later. The ANZ-Roy Morgan consumer confidence index for July, published 31 July, lifted 8 points to 99.3, its highest reading in five months.
How the survey numbers are built
Both indexes are net balances, and that matters for how much weight to put on them. In the ANZ survey, firms are asked whether they expect general business conditions to improve, stay the same or get worse. The published reading is the share expecting improvement minus the share expecting deterioration. A figure of 56.1 means that once the pessimists are cancelled out, a net 56.1 percent of respondents were left expecting conditions to improve. It says nothing about the size of the improvement. A firm expecting half a percent of growth and a firm expecting twenty percent both count once.
The consumer index is scaled differently, around a neutral 100 rather than a zero. At 99.3, July’s reading is still a fraction below the point where optimists and pessimists balance out. The detail underneath is more mixed than the headline. The current conditions measure rose 5.3 points to 88.5, well under neutral, while the future conditions measure surged from 96.7 to 106.5. Asked whether it is a good time to buy a major household item, the net answer was still minus 7.
In other words, both surveys are largely measuring what people expect rather than what they are doing. The ANZ survey also asks firms what has already happened, and that answer is far flatter. A net 10 percent reported their activity was up on the same time a year earlier, barely changed from a net 9 percent in June. Staff numbers were reported as roughly level with a year ago. The distance between a net 10 for past activity and a net 49.3 for expected activity is the whole argument in one survey.
What the official data shows
Stats NZ reported on 20 July that the consumers price index rose 4.1 percent in the twelve months to the June 2026 quarter, up from 3.1 percent in the March quarter and well above the Reserve Bank’s 1 to 3 percent target band. The quarterly rise was 1.5 percent. Fuel did most of the damage, with petrol up 27.5 percent and diesel up 71 percent over the year. Stats NZ noted that without those fuel movements, annual inflation would have been 2.9 percent, inside the band.
Eight days later Stats NZ published the household living-costs price indexes for the same quarter, which showed average household costs up 3.2 percent over the year. That average hides a wide spread. Superannuitant households were up 4.5 percent, beneficiary households 3.7 percent, and the lowest spending fifth of households 4.3 percent, against 1.9 percent for the highest spending fifth. Petrol accounted for close to a third of the average annual rise, and it takes a bigger bite out of a small budget than a large one.
The reason the living costs measure came in below the CPI is worth understanding, because it is about to work in reverse. Unlike the CPI, the living costs indexes include mortgage and other interest payments. Those payments fell by more than 15 percent over the year to June, which dragged the average down. That was the tail of the rate cutting cycle. On 8 July the Reserve Bank lifted the official cash rate 25 basis points to 2.50 percent, its first increase since May 2023. As mortgages roll onto higher rates, the interest component stops subtracting from household living costs and starts adding to them, which will push the measured cost of living for mortgaged households above what the CPI shows.
Growth is the other side of it. Bank economists are picking that the economy went backwards in the June quarter, with Westpac forecasting a contraction of 0.1 percent, BNZ 0.2 percent and ASB 0.3 percent. Stats NZ will not publish the June quarter national accounts until September, so those remain forecasts rather than measurements, but none of the major banks expects the quarter to have been positive.
The week ahead
Labour market statistics for the June quarter are due from Stats NZ on Wednesday 5 August. A survey of forecasts collected by interest.co.nz has the Reserve Bank, BNZ and Westpac picking an unemployment rate of 5.4 percent, with ANZ and ASB at 5.5 percent. The March quarter rate was 5.3 percent, with 163,000 people counted as unemployed. A reading of 5.5 percent would be the highest in about eleven years.
There is one more detail in the July survey that cuts against the headline. Westpac’s economists noted that firms answering later in the month were noticeably less upbeat than those answering early, with forward looking measures generally weaker in the late sample. Those later responses came in after the Reserve Bank’s rate rise and after another lift in oil prices. The 19 point jump, on that reading, is partly a snapshot of how the month began rather than how it ended.
Inflation expectations tell a similar split story. Firms in the ANZ survey now expect inflation of 3.14 percent a year out, down from 3.36 percent in June, and a net 47 percent intend to raise prices in the next three months, down 4 points. Households in the ANZ-Roy Morgan survey were flat at 4.6 percent, though that measure looks two years ahead rather than one, so the two are not directly comparable. Both remain above the 2 percent midpoint the Reserve Bank is aiming for.
None of this makes the confidence rebound meaningless. Sentiment surveys arrive within days of the month they cover, while GDP arrives about three months late, and firms that expect to hire and invest sometimes go on to do it. But a net balance is a count of directions, not a measure of size, and the same survey that recorded a 19 point jump in expectations recorded almost no change in what firms said they had actually done. The Reserve Bank’s next call on the official cash rate comes on 2 September with a full Monetary Policy Statement. Between now and then it will get Wednesday’s labour figures, and those are a measurement rather than an opinion.
What are you seeing where you work? Do the confidence numbers match what is happening in your industry, or does the flat activity reading look closer to the mark? Leave a comment below and tell us what you are seeing.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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