New Zealand business sentiment improved slightly in May, though confidence remains near three-year lows [1].
This marginal recovery comes as firms struggle with the economic fallout from the U.S.–Israeli war on Iran. The ongoing Gulf crisis has inflated fuel prices, which in turn increases operating costs and erodes profit margins for companies across the country [2, 3].
Earlier reports from April indicated a deeper pessimism among business leaders. During that period, business confidence fell to its lowest level since mid-2024 [2]. The sharp decline was driven by the immediate shock of surging costs and a corresponding drop in consumer demand as the conflict in the Gulf intensified [2, 3].
While the May data shows firms are slightly less gloomy, the recovery is modest. High fuel costs continue to act as a primary headwind for the private sector. These expenses affect a wide range of industries, from airlines to banks, as the ripple effects of the geopolitical crisis persist [3].
Companies are currently balancing the need to maintain profitability against the risk of passing too many costs on to consumers. The volatility of energy markets remains a central concern for New Zealand executives attempting to forecast growth for the remainder of the year [1, 2].
“Business sentiment recovered slightly in May but remains near three-year lows”
The slight uptick in sentiment suggests that New Zealand firms are beginning to adapt to the 'new normal' of elevated costs, but the underlying economic pressure remains severe. Because the business cycle is heavily influenced by global energy prices, the recovery of the domestic private sector is effectively tethered to the resolution of the Gulf crisis.
