Business confidence in January eased back from a 30-year high in December, according to the latest ANZ Business Outlook survey.

But despite falling 10 points (from 74 to 64) it remained extremely strong, ANZ chief economist Sharon Zollner said.

“Expected own activity also dropped 9 points, but at 52 it is also historically very high,” she said.

The good news was that much of the surge in activity indicators in December had been maintained into January, despite the bounce in interest rates following the November Monetary Policy Statement (MPS), Zollner said.

“The next few months will show whether talk of rate hikes this year will snuff out momentum.”

The “less-good news” was re-emerging signs of inflation pressure, she said.

The net percentage of firms expecting to increase their prices lifted sharply to 56.5, the highest level since March 2023.

“This indicator is heading in the opposite direction to the RBNZ’s [Reserve Bank] inflation forecasts. Cost and inflation expectations were more benign,” Zollner said.

“We are forecasting the first OCR [Official Cash Rate] hike to come in December this year, but if these pricing intentions manifest in hard data, it’ll come earlier than that.

“On the other hand, if the fall in the activity indicators this month proves to be the start of a meaningful loss in momentum, risks could tilt back the other way.”

Mild upward pressure was also starting to emerge in wages.

“The expected wage increase of 2.8% is hardly strong but has turned higher,” Zollner said.

“In terms of past outcomes, the proportion of firms who said they have raised wages in the past 12 months increased from 67% to 72%, the highest since April 2024, while the average reported wage increase lifted from 2.6% to 2.8%.”

Past own activity eased 3 points to 26, the second-highest read since August 2021, while past employment lifted 3 points to 7, the highest since October 2022.

“The economy has clearly turned higher,” Zollner said.

“Reported past activity (the best indicator of GDP) is suggesting a solid [fourth-quarter] GDP result could be on the cards, with a broad-based lift, and the strength has been largely maintained into January.”

Reported past employment was also rising and was back in the black for all sectors.

That hadn’t been the case since late 2022, Zollner said.

Liam Dann is business editor-at-large for the NZ Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.