New Zealand's business sentiment improved dramatically in July, with two key ANZ surveys pointing to a sharp rebound in economic confidence. The ANZ Activity Outlook index rose to 49.3 from 36.9 in June, while the ANZ Business Outlook Index surged to +27.1 from +6.1, marking the largest monthly gain this year.
The ANZ Activity Outlook, a forward-looking gauge of business expectations, neared the neutral 50 mark, signaling that firms are almost balanced between optimism and pessimism. The Business Outlook Index, a headline confidence measure, jumped to a level not seen since early 2023, surprising analysts. The survey details also showed a notable easing in inflation expectations, which fell to 3.6% from 4.0%.
The New Zealand Dollar strengthened across the board following the data. NZD/USD climbed to 0.6110 from 0.6080, and NZD/AUD rose to 0.9100. Markets interpreted the improved outlook as reducing the urgency for further rate cuts by the Reserve Bank of New Zealand, with the next policy meeting on August 14 now in focus. The data suggests the economy may be finding a floor after high interest rates and sluggish demand.
While the readings are still cautious, the magnitude of the month-on-month improvement provides a tangible signal that businesses see light at the end of the tunnel, potentially supporting investment and employment in the months ahead.
