The New Zealand ANZ Business Survey reports a confidence level of 57.5%, a decline from the previous figure of 58.4%. Business activity improved to 48.6%, showing an increase from 45.1% prior.
Expectations regarding pricing and costs have increased, climbing by 3-4 points to reach the highest level observed in over a year. Additionally, one-year-ahead inflation expectations rose by 0.1 percentage points to 2.6%.
Mixed Conditions In Survey Results
These figures reflect a mixed set of conditions. Confidence dipped slightly, moving from 58.4% to 57.5%, which suggests that while sentiment remains broadly positive, some caution has crept in. At the same time, general business activity has picked up from 45.1% to 48.6%. That’s a meaningful shift, especially considering the subdued levels recorded earlier in the year.
Pricing intentions and cost expectations are both pushing higher. That’s clear from the 3 to 4 point rise, which brings them to the highest point they’ve been in over twelve months. It points to growing pressure on margins across several sectors, much of it likely related to imported cost inputs and perhaps even wage cost assumptions feeding in. On inflation, the bump up to 2.6% for one-year-ahead expectations is small on paper, but nevertheless it nudges the figure closer to the upper half of the Reserve Bank’s targeted range.
From our point of view, the takeaway here is fairly direct. Elevated pricing signals, when paired with rising inflation expectations, can reshape interest rate assumptions quite quickly. Even if current activity is recovering, as the reported lift suggests, rising costs paired with increasingly embedded inflation views may complicate the rate outlook.
Implications For Traders And Markets
For those of us trading rate futures or STIR products, the rise in cost-related indicators means market pricing for future OCR levels may see added volatility. Short-term rate curves could steepen if the inflation trajectory moves risk closer to additional tightening. That’s something to monitor, especially given the proximity of key decision dates and the lack of clear disinflation across the broader economy.
We should also note the divergence between firm-level confidence and activity. Confidence has slipped, yet reported activity is climbing. That tells us business managers might be seeing improved footing in actual operations, but remain wary about the direction of macro policy, costs, or global demand. That sort of divergence can mark a transition point in sentiment cycles, sometimes preceding larger shifts in behaviour.
For spreads, particularly in the front-end, we may begin to see more aggressive repricing should upcoming data reinforce the movement in inflation expectations. We’ll be watching yield differentials between short tenor NZDs and global counterparts to assess flow sensitivity. Meanwhile, any material increase in volatility could favour gamma holders, especially those well-positioned ahead of local macro releases.
In this environment, there’s also value in watching short-dated pricing signals across swap markets and looking at where breakevens are shifting. If inflation-linked curves start responding to the cost pressure noted here, it may be an early hint of embedded trends that conventional CPI prints take longer to confirm.
Overall, we find the most actionable cues not in the broad direction of survey sentiment, but in the pricing detail. As always, it’s in the rate path expectations where opportunity tends to be clearest. This series hasn’t yet turned in a way that demands immediate repricing, but the upward cost trend merits a firm focus on directionality over the near term.
