New Zealand Firms' Confidence Cools Amidst Rising Costs

New Zealand businesses remain optimistic but their confidence has cooled slightly according to ANZ's September survey. The report shows that firms' planned price hikes have been pared back, while they still expect costs to rise.

The survey points to a recovery, but not a smooth one. Firms' expectations for their own activity held steady at 48%, while reports of past activity fell five points to 11. Even so, many businesses are doing better than they were a year ago.

ANZ's inflation signal was calm on the surface, with firms' inflation expectations remaining essentially unchanged at 3.25%. However, the details were less comfortable. A net 82% of firms expect higher costs, up from 81%, while only a net 48% plan to raise prices, down from 51%.

The survey mix matters for markets because it suggests that businesses are facing a margin squeeze. If companies can't pass on higher expenses to customers due to patchy demand or tight competition, they may absorb the hit, cut spending elsewhere, or both.