Are we (kinda) seeing the economy turn?

A stream of end-of-year data coming through shows, on the surface, a generally more upbeat view of the economy. But it’s still hard to know what to make of all the data, and even though we’re optimistic for better economic outcomes in 2026, the data so far still means it’s cautious, rather than unfettered, optimism.

The BNZ-BusinessNZ Performance of Manufacturing Index (PMI) rose strongly in December, up to 56.1 (seasonally adjusted – where an index value above 50 indicates expansion). December’s result was the highest reading since the end of 2021. All sub-indices were up strongly too, with a strong gain in both new orders and production. 

Unadjusted regional results showed a continued strong run in the lower North Island, but with some contraction in Otago – meaning manufacturing might be bucking the general trend of strength across Otago in other indicators.

The BNZ-BusinessNZ Performance of Services Index (PSI) rose to 51.5 in December (seasonally adjusted), the first month of services expansion since February 2024. The December PSI snapped the longest stretch of services contraction since the PSI started in 2007.

The increase in the PMI and PSI in December 2025 saw a good rally in the combined indicator too, adding to already solid partial results that support GDP expansion in the fourth quarter.

Business confidence surveys at the end of 2025 showed the strongest levels of forward-looking confidence since early 2014. Both the longstanding Quarterly Survey of Business Opinion from NZIER, and the more high-frequency ANZ Business Outlook survey, showed a more upbeat business community.

The QSBO showed a net 39% of firms are optimistic about the year ahead, the highest reading since March 2014, with rising expectations for investment and employment. The net share of firms reporting employment growth in the last three months rose to 2.4%, the first positive result since the end of 2023.

However, there are also some increasing expectations of businesses looking to raise prices. A net 23% of firms were looking to raise prices in the next three months, the highest reading since the start of 2024. Cost increases still outstrip price increases, and profitability remains poor, but improving. A net 25% of firms experienced lower profitability in the last three months of 2025, but this result was the smallest negative proportion since mid-2022.

The ANZ Business Outlook survey also showed improving economic conditions. Business confidence was at +63 (up seven points) to the highest point since March 2014 too, based on Infometrics’ seasonal adjustment. Businesses’ own activity outlook also reached its highest reading since March 2014, rising seven points to +54.

MBIE’s Jobs Online index showed the number of jobs advertised in December 2025 was 9.8% higher than a year earlier, but month-to-month growth has been more muted recently. Infometrics seasonal adjustment of the Jobs Online index shows jobs advertised were down 3.9% in December from November, continuing a period of up-then-down in the monthly reports. The annual increase is also coming off a very low level of advertising, so overall jobs advertised in December were still down 27% from December 2019 levels.

Despite a limited improvement in job ads, the sheer amount of competition for jobs is overwhelming for many. Infometrics’ analysis of SEEK data shows that, despite the number of job ads on SEEK being 22% lower in November 2025 then in November 2019, the number of applications per job ad were 243% higher – in other words, there are now around 3.5 times more applications being made for every job ad posted than there were back in 2019.

There have been some limited signs of a turnaround in job activity over the second half of 2025 that suggest a further improvement in 2026 – the annual decline in monthly filled jobs moderated to -0.4%pa in November 2025, an improvement from the 1.9%pa annual drop recorded in April 2025. Job numbers have essentially stopped declining and started to track sideways, if not slightly higher, over the second half of last year. However, the most recent monthly jobs figures continue to be revised lower than their original estimate each month, meaning we’re still cautious about confirming any pick-up in jobs.

Black Friday in 2025 usurped Boxing Day for the biggest sales spend-up day of the year. Combined with generally weaker retail conditions in December, this shift saw card spending fall at the end of 2025. Total core retail card spending declined by 0.5%pa in December, a reduction of $42m in total spending. Apparel and durables spending was hit the most, down 3.0% and 4.3%pa respectively, as households opted to spend more on food than presents.

If you’ve read through this report and are now going “huh, there’s patches of improvement, but it’s not totally convincing”, you’ve reached the same conclusion we have. We’re not necessarily seeing sustained upwards momentum across various economic indicators – the results more show things spluttering along, with some growth, but from a low level. Believing there’s better things ahead is still a bit of an act of faith for now!

Our latest forecasts – out next Friday (30 Jan 2026) – will profile our more detailed forecast trends for the year.