Business confidence has reached its highest point in 10 years, as reported by the ANZ Business Outlook survey for August.

Overall confidence surged by 23 points to +51 this month, while companies’ expectations for their own activities rose by 21 points to +37, marking a seven-year peak.

“The August ANZ Business Outlook survey showed a flurry of optimism. Forward-looking activity indicators lifted strongly, and this was evident already in the responses that came in at the very beginning of the month”, said ANZ chief economist Sharon Zollner.

“Things are looking up, albeit from a pretty dark place for many firms.”

Zollner added that the increase in confidence occurred before the Reserve Bank's interest rate cut on 13th August, New Zealand Herald reports.

“It wasn’t the Reserve Bank’s (RBNZ) cut to the Official Cash Rate (OCR) that kicked off the lift – we saw an increase across the survey already in July, and the further large jump in August was already evident when the survey first opened at the very beginning of the month,” she said.

“That’s certainly not to say that interest rates have nothing to do with it. Wholesale interest rates dropped steadily over July and into August as economic data deteriorated, and economists brought forward their forecasts of when the RBNZ would reduce the OCR.”

Wholesale rates dropped even more after the RBNZ reduced the OCR on August 14. However, Zollner noted that the significant decline in wholesale rates and the beginning of notable reductions in mortgage rates had started well before this. 

Although the results were impressive, she emphasised the importance of maintaining perspective.

“Not to be a killjoy, but it remains the case that the hurdle for expecting better times ahead is very low: reported past activity, which has a good correlation to GDP over its short history, barely lifted, and at -23 remains very weak.”

In addition, there was a significant variation in reported activity across sectors, with construction lagging far behind the others, followed by retail. Agriculture was the sole sector showing higher activity compared to a year ago. 

Pricing intentions increased by 3 points, with a net 41% of firms planning to raise their prices in the next three months. The average expected price increase also rose, from 1.4% to 1.6%.

Furthermore, by sector, both retail and manufacturing saw increases, with manufacturing's rise being particularly notable, climbing from 1.8% to 2.7%, the highest level since June 2023.

The average expected price changes for the services sector remained steady in August at 1.3%, while agriculture and construction saw declines, with construction dropping to just 0.5%. 

Moreover, inflation expectations decreased from 3.2% to 2.9%, marking the first time they have fallen below 3% since July 2021.