New Zealand's business confidence index climbed to 63.4 in January 2026, its highest level since 2014, fueled by expectations of imminent interest rate reductions and improved economic outlook. The surge reflects growing optimism across sectors despite persistent inflationary pressures.
- Business confidence index reached 63.4 in January 2026, highest since February 2014
- 14.7-point increase from December 2025, driven by expectations of rate cuts
- 68% of firms expect improved sales over the next six months
- 43% of businesses plan increased capital investment in Q1 2026
- Reserve Bank of New Zealand expected to cut rate from 5.5% to 5.0% in February
- NZX 50 rose 1.8%, NZD gained 1.2% against USD on improved outlook
New Zealand’s business confidence reached 63.4 in January 2026, marking a 14.7-point increase from December and the highest reading since February 2014. The figure, released by the New Zealand Institute of Economic Research, indicates sustained improvement in sentiment among firms across manufacturing, construction, and retail. The rise coincides with market expectations that the Reserve Bank of New Zealand will lower the official cash rate from 5.5% to 5.0% in February, the first cut following a prolonged tightening cycle. The index’s performance signals a turning point in business outlook, with 68% of surveyed firms reporting improved expectations for sales over the next six months. Investment intentions also increased, with 43% planning capital expenditures in the coming quarter—up from 37% in December. Notably, small and medium enterprises (SMEs) showed the strongest gains, contributing significantly to the overall index surge. Despite the optimism, underlying economic indicators remain mixed. Inflation, though moderating, stood at 3.1% year-on-year in December—above the central target of 2–3%. Labour market data showed a slight rise in unemployment to 4.2%, but employment growth remained stable at 0.5% monthly. These factors underscore caution amid the positive momentum, particularly in sectors sensitive to borrowing costs like housing and infrastructure. The rally in business confidence has already influenced financial markets. The New Zealand dollar rose 1.2% against the US dollar in early trading, while the NZX 50 index gained 1.8% on expectations of reduced borrowing costs. Investors are closely monitoring the Reserve Bank’s February policy meeting, which will determine whether the anticipated rate cut materializes. The outcome could further shape business investment and consumer spending in the first half of 2026.