New Zealand business confidence falls to record low

Business confidence in New Zealand dropped to a record low in December. Its decline occurred after the central bank drastically increased interest rates. Another reason for such a change is the bank’s projections regarding the entry of the economy into a recession.

The monthly business sentiment index fell from minus 57.1 in November to minus 70.2, ANZ Bank New Zealand said in Wellington on Tuesday. The indicator of firms' gauge regarding their own performance plunged from minus 13.7 to minus 25.6.

Last month, the Reserve Bank’s rate was raised by a record 75 basis points to 4.25%. The benchmark could rise to 5.5% in 2023. Its growth is explained by constant inflationary pressures on the economy. Rising costs and falling housing prices are starting to undermine household spending and consumer confidence. However, most economists agree with the RBNZ that a recession is inevitable.