The latest NZIER Quarterly Survey of Business Opinion (QSBO) for Q1 2025 reports Business Confidence at 19%, rising from 16%. Capacity Utilisation is at 90.5%, a decrease from 91.3%.
The data reflects influences from political factors, particularly Trump’s tariffs, rather than economic conditions. The New Zealand Institute of Economic Research has been conducting this survey since 1961, making it the longest-running business opinion survey in the country.
Uptick In Business Confidence
What the latest NZIER QSBO figures show is an uptick in headline business confidence, moving from 16% to 19%—a noticeable rise, though not an eruption of optimism. That shift may appear moderate on the surface, but it confirms that sentiment has been inching upward despite broader global uncertainty. There’s been a slight fall in capacity utilisation, down to 90.5% from the previous quarter’s 91.3%. That kind of movement suggests that firms are still operating at fairly high levels, yet perhaps beginning to meet limits in output expansion without further investment or staffing.
It’s important to understand that momentum in these headline figures ties back more to geopolitics—especially tariff measures—rather than any boost in local fundamentals. The presence of foreign economic policy in our domestic indicators reinforces how responsive New Zealand businesses remain to overseas political developments.
Translating that into market positioning, the mild growth in sentiment implies that expectations are not being reset dramatically. We should take note that demand-side pressures don’t appear to be rapidly escalating. Instead, firms report steady but not surging activity.
Trading Perspectives On Capacity Utilisation
From a trading perspective, the dip in capacity utilisation—though minor—could be offering one of the few forward-looking hints about underlying production constraints, which often signal potential ripple effects for pricing, supply-chain pressures, or even employment demand. These can in turn affect forward inflation expectations and rate pricing.
Added to this is a subtle but relevant theme that businesses may be holding back rather than dialing up investment. They’re alert to international noise, and that alone might keep some from chasing aggressive expansion. In that context, it becomes clearer that confidence levels, while improved, are still navigating external unknowns rather than reflecting strong domestic demand.
The Q1 readings also shine a light on the types of sectors contributing to these changes. Where service firms are slightly more upbeat, manufacturers appear burdened by cost implications—mainly imported ones. That split matters: When different parts of the business community reveal contrasting outlooks, it complicates any one-size-fits-all interpretation.
We’ve been here before—when sentiment lifts not because businesses are bullish, but because they’re slightly less worried than last month. As risk managers, this means interpreting each report with a layered approach. Not all moves higher are alike.
In tracking macro signals, the current direction isn’t abrupt enough to trigger sharp repricing of risk. But it does highlight that downside probabilities from geopolitical shocks still weigh on decisions.
Therefore, it’s not about chasing the headline number. It’s about what happens beneath it: how firms view orders, pricing intentions, or the near-term hiring climate. Looking at the last print, intentions for investment haven’t surged, and that speaks volumes.
For those of us watching implied volatility turn soft in certain asset classes, this flat to slightly better sentiment should not be confused with renewed strength. Rather, it’s a subdued nod to resilience in the face of ambiguity. We’ll want to weigh that tone carefully in our next positioning call.
