NZ Business Confidence Eases Amid Oil Price Surge

New Zealand's business outlook softened in September, but the decline was more pronounced in reported activity than in headline confidence. Business confidence eased from 53.7 to 51.9, while firms' own activity outlook remained nearly unchanged at 47.9.

The most significant drop was seen in actual activity, with the net balance of businesses reporting stronger activity than a year ago falling sharply from 16.4 to 10.8. This decline was largely attributed to the late-month surge in oil prices, which impacted various sectors, including retail and services.

Inflation indicators showed surprisingly little reaction to the oil price spike, with one-year inflation expectations holding steady at 3.25% and pricing intentions easing from 51.0 to 48.4. Cost pressures remained elevated, however, with the net share expecting higher costs rising to 81.9.

The uneven recovery is reflected in sector performance, with manufacturing and construction strengthening while retail, services, and agriculture cooled. ANZ describes this as a 'bumpy recovery', where renewed external shocks are weighing on momentum without yet producing a corresponding rise in inflation expectations.