Anz Business Outlook's Confidence Decline: A Buying Opportunity in New Zealand's Resilient Sectors

The ANZ Business Outlook's May 2025 survey revealed a stagnation in business confidence, with the index flat at +58, while expectations of slowing inflation and mixed sectoral performance have fueled investor caution. Yet, beneath the surface, certain industries are defying the gloom. For investors, this divergence between sentiment and fundamentals presents a rare chance to capitalize on undervalued opportunities in sectors demonstrating robust activity metrics and pricing power. Here's why agriculture, manufacturing, and commercial construction are poised for growth—and how to act now.

Agriculture: The Anchor of Export Resilience

New Zealand's agricultural sector has long been its economic lifeline, and the latest data confirms its resilience. Exports of dairy, meat, and horticultural products remain buoyant, driven by strong global commodity prices and China's gradual reopening. Despite broader confidence dips, agricultural pricing intentions have stabilized, with firms projecting a 1.7% price increase over three months—modest but sustainable.

The sector's pricing power is underpinned by structural advantages: New Zealand's clean, green brand commands premium pricing in Asia, while its dairy exports dominate global markets. Companies like Fonterra (NZX: FNT) and Synlait Milk (NZX: SML) are leveraged to this tailwind.

Investment Opportunity: The NZX Agriculture Index (NZX:AIG) has underperformed broader markets by 12% over the past year, despite consistent export growth. With China's demand rebound and inflation risks moderating, this gap is narrowing.

Manufacturing: Navigating Cost Pressures with Precision

Manufacturing activity, though uneven, shows signs of stabilization. Cost pressures—particularly electricity prices and a weaker NZD—have been persistent, but firms have adapted. Pricing intentions remain steady at 42%, and one-year inflation expectations have dipped to 2.5%, easing margin pressures.

The high-value manufacturing subsector—think medical devices, aerospace, and clean-tech—is outperforming. Companies with export exposure, such as Contact Energy (NZX:CEN) in renewables and Aker Solutions (NZX:AKE) in engineering, are positioned to benefit from global decarbonization trends.

Why Now? Valuations are attractively low. The NZX Manufacturing Index (NZX:MFG) trades at 12x forward earnings, a 20% discount to its five-year average. As cost inflation moderates and global supply chains normalize, profitability should rebound.

Commercial Construction: A Contrast to Residential Malaise

While residential construction languishes—intentions fell to -16 in 2024—commercial real estate is thriving. Office and industrial projects, fueled by e-commerce growth and infrastructure spending, have kept activity positive. The ANZ report notes that past own activity in commercial construction rose to +32 in Q1 2025, a stark contrast to residential's struggles.

Investors should target companies like Multiplex (NZX:MPL) and Merivale (NZX:MVE), which are tied to high-demand sectors like logistics hubs and tech campuses.

Key Insight: Commercial construction's resilience reflects structural demand shifts—remote work has not killed office spaces but redefined them, while e-commerce requires warehousing and distribution centers.

The K-Shaped Recovery: A Buying Signal

The “K-shaped” recovery highlighted by ANZ's data—where affluent households and high-margin industries outperform—is a clarion call for thematic investing. Sectors like luxury tourism (e.g., Skyline Group NZX:SKY), which cater to wealthier travelers, and healthcare (e.g., Pharmwell NZX:PWH), are insulated from broader economic dips.

Act Now: A Contrarian Play

The market's focus on falling confidence is overdone. The ANZ survey's past own activity—a leading GDP indicator—improved to +1 in March, suggesting growth is still positive. Meanwhile, inflation's retreat reduces risks of further rate hikes, supporting corporate earnings.

The sweet spot is in stocks with:
1. Pricing Power: Agriculture and healthcare.
2. Cost Discipline: Manufacturing exporters.
3. Structural Tailwinds: Commercial construction and clean energy.

Final Call

Investors who wait for “better days” may miss the window. The May 2025 confidence dip has created a buying opportunity in sectors that are already winning. Use this moment to lock in exposure to New Zealand's resilient industries—before sentiment catches up to reality.

The time to act is now.