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“Business optimism continues to rise, with forward-looking activity indicators higher again, and a decent lift in reported past activity and employment,” says ANZ chief economist Sharon Zollner.

The construction sector turnaround was particularly notable, she said.

Business confidence rose another 5 points to +66 in October, while expected own activity ticked up 1 point to +46.

Experienced own activity lifted 8 points to -11, its highest level since March.

“That said, both past activity and employment remain in negative territory for every sector except agriculture, indicating more firms are reporting they are lower than are saying they are higher, compared to a year earlier,” she said.

“The net proportion of firms expecting higher costs fell slightly, while the net proportion intending to raise prices ticked higher. Both remain above pre-Covid levels, a reminder of the conditionality of ongoing OCR cuts.

“Inflation expectations ticked slightly lower but are still much closer to the top of the RBNZ’s target band (3%) than the middle (2%).

“Reported wage increases versus a year earlier were steady but mixed by sector, while expectations for firms’ own wage increases over the next 12 months eased a touch.

“They’ve been there or thereabouts for six months now, and they’re right where the RBNZ would like them to be, in terms of being consistent with CPI inflation of 2%.”

The October survey again showed that steady falls in interest rates are injecting new optimism into businesses, Zollner said.

“And it’s not just unsubstantiated hope – a smaller net proportion of firms are now reporting that activity is lower than a year earlier, with the sharpest lift for respondents in the construction sector.”

But with both past activity and employment still in negative territory economy-wide and the pressure was still on, she said.

“That’s particularly true of the retail sector, with reported past activity yet to turn higher for this sector.

“This likely reflects that for consumers, the positive impact of lower interest rates is being offset by worsening job security.

“The Business Outlook survey suggests the labour market will turn upwards too, but given the labour market lags activity considerably, there are still some hard yards to traverse before then.”

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