New Zealand’s ANZ Business Outlook Index fell to 64.9 in November 2024, down from October’s decade-high of 65.7. This slight dip reflects a mixed economic landscape as businesses navigate fluctuating market conditions. While some indicators signal easing pressures, others point to challenges in key sectors. Despite the decline, forward-looking activity remains robust, suggesting that businesses are cautiously optimistic about future opportunities. Let’s take a closer look at how specific factors, such as pricing, investment, exports, and inflation expectations, are shaping the economic outlook.

Pricing and Investment Intentions Ease

One of the more notable changes in November was the decline in pricing intentions, which fell for the first time in four months, from 44.2 in October to 42.2. This shift may indicate that businesses are beginning to see relief in cost pressures, potentially paving the way for more stable pricing strategies. However, this easing comes amid softer investment intentions, which dropped to 18.0 from a three-year high of 20.0 in the previous month.

Wage pressures, a persistent challenge for many sectors, showed a modest decline in November, falling to 75.5 from October’s 77.0. While this represents a slight easing, wage inflation remains a concern as businesses continue to compete for skilled labor in a tight job market.

Exports and Profit Expectations Show Strength

In contrast to the softer pricing and investment outlook, export intentions rose sharply, climbing to 21.2 from 17.1 in October. This improvement highlights growing confidence in New Zealand’s external trade environment. Businesses are benefiting from strong international demand, bolstered by elevated profit expectations, which remained relatively steady at 26.5, only slightly down from 27.0.

Cost expectations also continued to ease, falling to 62.9 from 64.2, suggesting that businesses are seeing some relief in operational expenses. Combined with stronger export performance, this could help sustain profitability in the months ahead. Forward-looking activity indicators also improved, rising to 48.0 from 45.9, signaling resilience in business operations and future growth prospects.

Credit Availability at Record Highs

Another bright spot in November’s data is the record-high credit availability. The index for credit availability surged to 27.1, up from 23.5 in October. This is a positive development for businesses looking to expand or invest in new opportunities, as easier access to financing can help drive economic activity.

Employment intentions also showed modest improvement, rising to 14.7 from 14.2, indicating that businesses remain committed to hiring despite broader economic uncertainties. Past activity levels improved slightly, with the index moving from -10.5 to -9.7, reflecting a gradual recovery in overall business performance.

Construction Slows Amid Lower Inflation Expectations

However, not all sectors are faring equally well. The construction industry experienced a significant slowdown in November. Residential construction activity dropped sharply to 25.8 from 38.7, while commercial building intentions eased to 25.0 from 26.5. These declines suggest a cooling in the construction sector, which had previously been a strong contributor to economic growth.

Meanwhile, inflation expectations continued to decline, falling to 2.53% from 2.83% in October. This ongoing downward trend is a positive signal for the broader economy, as it may provide the Reserve Bank of New Zealand with more room to maneuver on monetary policy.

Outlook for the Months Ahead

Despite the mixed results, the overall business environment remains relatively stable. Improvements in export intentions, profit expectations, and credit availability offer hope for continued growth, even as the construction sector faces headwinds. With inflation pressures easing and wage growth moderating, businesses may find themselves in a better position to manage costs and plan for the future.

As the year draws to a close, the focus will likely remain on how businesses adapt to changing market conditions and leverage emerging opportunities in both domestic and international markets.