Business Confidence

Business Confidence, or Business Confidence Index (BCI), tracks expected business performance through the OECD survey programme Business Tendency Surveys, published in Main Economic Indicators. For New Zealand, the input is the Quarterly Survey of Business Opinion from the New Zealand Institute of Economic Research (NZIER). That survey asks around 10000 firms each quarter whether conditions will improve, stay the same, or deteriorate over the next 3 months. The OECD rescales replies around 100, so 100 means normal, not a firm share and not measured output, sales, hiring, or profits.

The OECD recomputes confidence indicators monthly on its leading indicator schedule and posts them on the OECD Data Explorer. Each Main Economic Indicators release shows business confidence alongside consumer confidence and the composite leading indicator as Tables 13, 14, and 15. The newest month can appear as missing until data arrive, and each rerun can revise history as whole series filters and source data update. The New Zealand input itself is quarterly, with the national survey released on the 1st or 2nd Tuesday after each quarter ends.

For New Zealand, the index tracks 1 forward-looking survey question rather than the standard 3 question industry average.

• Business situation, future tendency: It captures firms' expected general business situation over the next 3 months.

From February through June 2021 the series held just above 100, starting at 100.2 in February and peaking at 100.6 in May. It touched 100.0 in July, fell to 99.3 in August, then stayed below 100 through December and ended at 98.4. The shift was only about 2 points, yet it flipped the signal from mild optimism to pessimism. January 2022 was still missing at publication.

1. Net balance: Convert reply counts to percentage shares, then subtract the negative share from the positive share, so Balance = 100 x (P minus N). Illustrative: 200 respondents split into 40 positive, 60 neutral, and 100 negative. That is 20 percent positive and 50 percent negative, so 20 minus 50 = minus 30.
2. New Zealand input: Use the seasonally adjusted net balance for expected business situation. No averaging applies because New Zealand uses this proxy rather than the standard 3 question average.
3. Period conversion: Convert the quarterly series to monthly by linear interpolation, aligned to the central month. Illustrative: +6 for Q1 and +9 for Q2 gives March +7 and April +8.
4. Smoothing: Smooth the adjusted series with the Hodrick Prescott filter, preserving the trend cycle component, using lambda = 1 to cut swings below 6 months.
5. Normalisation: Subtract the long run mean, divide by the standard deviation, then add 100 to rescale. Example: a smoothed value of 8 with mean 2 and standard deviation 5 gives ((8 minus 2) / 5) + 100 = 101.2.
6. Amplitude adjustment: Multiply the rescaled deviation so swings match de-trended GDP. Example: with a GDP factor of 0.8, 101.2 becomes about 101.0, still above 100 and hence above average confidence.