BNZ & SEEK Employment Report: Bending upwards
Job ads continued to trend higher in January. Combined with the upward revision to December, it is encouraging to see consecutive months of improvement in the number of roles advertised on SEEK. Total ads for the last three months (Nov – Jan) are up 4.4% on the previous three months (Aug- Oct).
RBNZ Holds, Plays Straight Bat
We thought the RBNZ would hold its cash rate at 2.25% today, remove the previously projected possibility of easing further, and take a cautious approach to projected rate hikes down the track, but still modestly strengthen that outlook. That is exactly what the Bank delivered today.
Annual inflation to ease, but how fast?
Selected prices for January were close to our expectations on net. Being the first month of the quarter, they provide our first clear insight into Q1 CPI. Working through the unders and the overs, there was nothing in today’s data to alter our +0.5% q/q and +2.7% y/y pick for Q1 CPI. They support our view that headline annual inflation will ease in Q1 following the lift to 3.1% in Q4.
Momentum maintained
The services sector in New Zealand remained in expansion for the first month of 2026, according to the BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for January was 50.9 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 0.8 points lower than December and below the average of 52.8 over the history of the survey.
BusinessNZ's CEO, Katherine Rich said that despite the January result showing a lower level of activity than December, at least the sector remains on the right side of the ledger after such a lengthy period of contraction. Two of the five sub-index values were in expansion for January, with Activity/Sales (54.2) leading the way, followed by New Orders/Business (51.8). Stocks/Inventories (49.7) fell back into contraction, while Employment (49.1) dropped further compared to December.
The proportion of negative comments for January was 58.7%, which was up from December (50.4%) and November (52.9%). Negative comments received showed the services sector still reporting low confidence, with Christmas–New Year holidays and seasonal shutdowns leading to fewer enquiries and a prolonged post-holiday slowdown. These effects were compounded by high living and operating costs.
BNZ's Senior Economist Doug Steel said that "the big question to end 2025 was whether the economy may be turning. Data since then has given us confidence that recent positive momentum can be sustained. The economy is growing".
Healthy expansion continues
January's activity for New Zealand’s manufacturing sector again showed a healthy level of expansion, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for January was 55.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was 0.9 points lower than December, it was still above the average of 52.5 since the survey began.
BusinessNZ’s Director of Advocacy, Catherine Beard, said that the January result starts the year in the right direction after a lacklustre 2025.
"All five sub-index values were again in expansion during January. This was led by the two key indices of production (56.6) and New Orders (56.4), followed by Deliveries (53.3). Employment (52.9) recorded its third straight monthly expansion, which had last occurred in the first few months of 2025.
Despite the PMI remaining in expansion during January, the proportion of positive comments from respondents stood at 47.7% for January, down from 57.1% in December and 54.4% in November. A number of manufacturers reported weak demand, citing Christmas and summer holiday shutdowns disrupting production, skewing orders, and extending the seasonal shutdown into the new year.
BNZ’s Senior Economist Doug Steel said that "the January PMI provides further evidence that the economy has finally turned the corner. It is consistent with our forecasts and a breadth of indicators suggesting decent economic growth".
Labour market lags economic cycle
The themes of today’s mass of labour market data were much as we outlined in our preview. First, it is too early to see major changes in the labour market as it tends to lag the economic cycle. Second, there are more signs of improvement in the details. Within a decimal point or two the headline figures broadly confirmed our priors.
Inflation worryingly high
The chances of a 2026 rate hike rose significantly today with annual CPI inflation rising to an eighteen month high of 3.1%. We think our new laser-focussed-on-inflation RBNZ Governor will not be amused.
Lull in the upswing?
The upswing in SEEK job ads saw a hint of stalling into the end of 2025. After 13 consecutive monthly gains on a trend basis, job ads eased 0.3% in December. This unwound November’s gain. Latest trend estimates can get revised, so interpretation requires some caution. But the hint of a flattening trend at a still relatively low level is important to monitor. If it were to continue, it would raise downside risks to forecasts of employment growth ahead.
Expansion
The services sector in New Zealand experienced expansion for the first time since February 2024, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for December was 51.5 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 4.3 points higher than November, but still below the average of 52.8 over the history of the survey.
BusinessNZ's CEO, Katherine Rich said that the December result ended the longest run of contraction for the sector since the survey began, stretching to 21 months. Three of the five sub-index values were in expansion, with kew Orders/Business (52.5) leading the way after four months of consecutive contraction. This was followed by Activity/Sales (52.2) and Stocks/Inventories (51.9). Despite the return to overall expansion, Employment (49.6) still remained in slight contraction.
The proportion of negative comments for December stood at 50.4%, but this was still below November (52.9%) and October (54.1%). Negative comments received showed the services sector constrained by weak demand and confidence, high living and operating costs and Christmas-related shutdowns. On the flip side, positive comments saw the services sector supported by seasonal Christmas and summer demand, improving consumer confidence driven by lower interest rates, stronger tourism, new contracts and bookings, and early signs of broader economic recovery and investment activity.
BNZ's Senior Economist Doug Steel said that "the PSI is not strong, but the positive direction of travel is important to acknowledge. Especially when the PSI is joined with the large jump in last week’s PMI, the combined index (PCI) signals firmly positive GDP growth into the end of 2025 and establishes forward momentum heading into the New Year".
Manufacturing ends year on high
December's activity for New Zealand’s manufacturing sector showed its highest level of activity since December 2021, according to the latest BNZ –BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for December was 56.1 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 4.4 points higher than November, and above the average of 52.5 since the survey began.
BusinessNZ’s Director of Advocacy, Catherine Beard, said that the December result was a very welcome way to end the year, with 8 of the 12 months showing some level of expansion.
"All five sub-index values were in expansion during December. This was led by kew Orders (59.8), which was at its highest level of activity since July 2021. Production (57.4) also showed a significant lift in activity, while Employment (53.8) continued to recover after a number of months exhibiting declines during 2025.
The proportion of positive comments from respondents stood at 57.1% for December, which was up from 54.4% for November and 45.9% in October. Manufacturers saw improved activity, mainly due to seasonal Christmas demand, which lifted domestic sales, orders, and short-term workloads. This was supported by firmer business and consumer confidence, increased export and forward orders, and some gains from new customers, products, and infrastructure-related work.
BNZ’s Senior Economist Doug Steel said that "the PMI is positive for Q4 GDP calculations and points to good momentum heading into the New Year. At face value, it suggests upside risk to the positive view we already have for manufacturing and near-term GDP growth forecasts".
Another quarter of 3% annual inflation?
A couple of the headlines from today’s selected prices looked benign enough on the inflation front, but they were more than offset by chunky gains in some of the details. The key takeaway is that today’s figures support our view that next Friday’s Q4 CPI is likely to print above the RBNZ’s November MPS forecasts.
QSBO Indicates Strengthening Economy
We are moderately, and happily, surprised by the strength revealed in NZIER’s December Quarterly Survey of Business Opinion. At face value it shows that momentum in New Zealand’s economic recovery is gaining a real head of steam and, accompanying that, inflationary pressures are already building in a meaningful way.
GDP volatility reigns
Today’s GDP outturn delivered what it promised, namely more noise than signal.
Over the last five quarters, starting Q3 2024, the economy has allegedly plummeted 1.3%, stalled at 0.1%, soared 1.1%, crashed 1.0% and soared again in Q3 2025 this time by 1.1%. Does anyone feel this is a true reflection of what happened to them? And do we really think we are currently growing at the same pace as China (1.1% for Q3) and three times that of Australia (0.4% for the quarter)?
Deficit narrowing continues, for now
The current account deficit narrowed to 3.5% of GDP in the year to September 2025. It was a tick wider than our forecast of 3.4%, but smaller than the 3.7% annual deficit recorded in June and extends a material narrowing over the past three years.
Fiscal surplus still a distant dream
Key numbers
The core fiscal deficit (OBEGALx) is forecast to rise to a six year high of 3.0% of GDP in the June year 2026.
It is forecast to decline steadily the following three years before returning to a 0.4% of GDP surplus in Fiscal 2030.
Net debt rises from 41.8% of GDP in the year ended June 2025 to a peak of 46.9% in Fiscal 2028. It edges lower to 46.1% of GDP in Fiscal 2030.
The economy is forecast to grow 2.0% in the year ended June 2026 and then bounce 3.5% the year after. Growth is expected to average 2.6% per annum in the three years thereafter.
Familiar themes in monthly inflation indicators
Our main interest in today’s November Selected Prices was if they had any material influence of our thoughts for near term CPI. In short, they didn’t.
There were some unders and overs in the details, but overall, the monthly indicators were in line with our expectations.
Dare to believe?
SEEK job ads continue to show positive signs, trending upwards off a low base. It is encouraging to see five consecutive months of improvement (seasonally adjusted). Job ads for the last three months (Sep – Nov) are now up 3.9% on the previous three months (Jun – Aug).
Same Story
The services sector in New Zealand dipped further into contraction during November, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for November was 46.9 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 1.5 points lower than October, and the lowest level of activity since May 2025. The November result was also still well below the average of 52.8 over the history of the survey.
BusinessNZ's CEO, Katherine Rich said that the November result put to bed any immediate hope that the sector was heading somewhere towards expansion. All five sub-index values were in contraction, with Activity/Sales (45.8) experiencing the greatest level of contraction for the current month. While New Orders/Business (49.3) still hovered just below the no change mark, Employment (46.4) also took a dip from October.
Despite a stronger level of contraction during November, the proportion of negative comments for November (52.9%) was lower than October (54.1%) and September (58.0%). Negative comments received show the services sector overwhelmingly citing the weak economic environment, including low consumer confidence, high living costs, inflation, interest rates, and reduced spending, as the main factors affecting recent activity.
BNZ's Senior Economist Doug Steel said that "combined with the Performance of Manufacturing Index (PMI), the composite activity indicator poses downside risk to even modest growth expectations for early next year".
Continued Gains
New Zealand’s manufacturing sector showed further expansion during November, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for November was 51.4 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 0.2 points higher than October, but still below the average of 52.4 since the survey began.
BusinessNZ’s Director of Advocacy, Catherine Beard, said that in the current economic climate, any move that sees activity both positive and higher than the previous month is a welcome step.
"Four of the five sub-index values were in expansion during November, lead by production (52.8). Employment (52.4) was in positive territory for the first time since April 2025, while New Orders (51.9) remained in expansion, albeit down from last month. In contrast, Deliveries (49.0) fell into contraction for the first time since June 2025.
The proportion of negative comments from respondents stood at 45.6% for November, down from 54.1% in October and 60.2% in September.
Manufacturers reported a lift in demand driven by seasonal Christmas activity, improving economic conditions and rising customer confidence. Increased orders, both domestic and overseas, along with stronger construction activity, new customers, and product launches contributed to a more positive outlook.
BNZ’s Senior Economist Doug Steel said that "the PMI has seemingly settled above the breakeven 50 mark. Nonetheless, we want to see more upbeat outturns from this survey and the Performance of Services Index (due Monday), to provide us with some comfort that the expected lift in Q3 GDP can be sustained into Q4".
GDP to show decent bounce
We have been warning of upside risk to Q3 GDP calculations for some time. Today’s business financial and energy data firmly add to that idea. Q3 GDP data is release next Thursday, 18 December.
Our estimate for Q3 GDP growth has been lifted to 0.9% q/q (from 0.6%) after trawling through today’s manufacturing, wholesale trade, energy, and services data.
Retail rips, businesses optimistic
Today’s economic data support our view that NZ’s economic recovery is well underway. After a lengthy period of weakness any pickup in activity will take time before it feels better, but evidence of a decent improvement is accumulating.