There have been some positive data in the past few days which hint at both a re-emergence of economic growth and the possibility that we may have seen inflation peak.

Don’t get me wrong, you can still pick and choose your data to match your mood.

I’m cautious.

Local economists seem to be cheering up, though, with some upbeat analysis coming through.

On the inflation front, we’ve had two indicators suggesting we may have skipped those worst-case scenarios that were on the table after the start of the Iran conflict.

High oil prices were projected to push inflation close to 5% and keep it above 4% all year.

But there is growing confidence that the annual rate of 4.1% we hit in the second quarter will be the peak.

Last week’s Reserve Bank (RBNZ) inflation expectations survey was a good one.

It’s not always a widely reported survey, but it is a measure that the RBNZ takes seriously for inflation forecasts and its Official Cash Rate path.

ANZ economists called it “broadly reassuring”.

They noted that near-term inflation expectations fell sharply, with one-year-ahead expectations dropping to 2.6% from 3.41%, while two-year-ahead expectations edged lower from 2.53% to 2.34% ... “comfortably within the RBNZ’s target range”.

The other piece of good news was the Stats NZ Selected Price Index – the monthly partial measure of Consumers Price Index (CPI) inflation.

It includes food, transport and accommodation costs, which account for about 47% of the full CPI.

On Monday, the data for July landed lower than most economists expected.

Food prices lifted just 0.1% for the month of July and have now risen just 1.9% in the past 12 months.

The meat, poultry and fish category recorded its largest monthly decline in more than five years, decreasing 1.7% monthly while remaining up 3.2% annually.

As a weekly supermarket shopper, I’m struggling to believe beef and lamb prices have come down, to be honest, but I suppose these things can be seasonal.

Anyway, the upshot is, the latest figures suggest that we aren’t yet seeing the pass-through of higher fuel costs to food prices.

Could it still happen? Sure, but it has been almost six months since oil prices spiked and despite ongoing Middle East tension, the markets seem to have found a range (between US$75 and US$95 a barrel) which the world is learning to live with.

“While sharp falls for retail fuel prices were largely as expected and airfares staged sharp July increases, downside surprises were notable for a number of components, including food, alcohol and household energy,” ASB’s Mark Smith said.

“Consumer caution and the subdued demand backdrop still look like it’s having a moderating impact on inflation.”

In other words, the economy is still so terrible that a lack of demand is keeping a lid on domestic inflation.

Meanwhile, rents dipped in June and annual rental inflation looked to have hit a record low, Smith noted.

A consensus of economists now sees inflation heading down, although how fast and by how much is still debated.

That’s got to be a relief for consumers and businesses and may help restore some much-needed confidence in the economic outlook.

Economic growth

Meanwhile, two pieces of data that give us pretty good insight into real-time GDP are the Performance of Manufacturing (PMI) and Performance of Services Indexes (PSI).

They check in on how business has been tracking for firms in the two key sectors of the economy.

Both have continued to expand, although, in the case of the services sector, only just.

But the trend has inspired some hope that we are seeing a return to recovery mode – albeit a slow one.

“The PSI was a touch disappointing in that its foray into expansion in June didn’t kick higher,” BNZ senior economist Doug Steel said.

The employment index remained weak and remained an area of concern, he said.

But a more optimistic take was that the PSI managed to maintain a mildly expansionary tone for the second consecutive month, he said.

“When combined with last Friday’s strongly positive PMI, it points to annual GDP [gross domestic product] growth of around 2%.”

Steel said that suggested “some mild upside risk” to near-term growth forecasts, ie they could come in better than expected.

Adding to the third-quarter pick-up “vibe” were July electronic card transactions, which also rose, he said.

KiwiBank economists decided to wrap all of the above into an upbeat research note and combine it with a mildly positive migration gain in June (with fewer Kiwis leaving) and an even bigger lift in tourist numbers (the biggest June year since 2019).

“We are full of positivity this week. Trying to buck the pessimistic economist stereotype,” they wrote.

All this data pointed to continued population-driven support for consumption, labour supply and housing demand, they said.

Alrighty ... the only way is up, it seems.

Personally, I’m reluctant to bring back my regular weekly “greenshoots watch” just yet.

I’ll just jinx it.

A record high ... yeah right

A reader, Rob S, has called me out for saying the local sharemarket has recently hit record highs.

He notes, quite correctly, that what I referred to was a record on the total return index, which is promoted by the NZX50 (and reported by all the major media outlets in their market reports).

On that basis, the NZX50 index went through 14,000 points for the first time ever last week.

But that’s a measure that includes the return with all dividends reinvested (tax-free with no broker fees or transaction costs).

In other words, Rob argues, it’s an unrealistic and misleading measure.

If you use the price return index (sometimes called the capital index), we are still a long way shy of the record that we hit in the post-Covid surge.

That shows a peak at 5681 points in January 2021. On the same basis, we’re still about 16% down.

For the record, both the price index and the total return index are available on the NZX website if you click through to the specific interactive chart for the NZX50 index.

But there is no question that the NZX promotes the latter and the media largely goes with that.

I think there are some valid reasons for that.

The index number is just a benchmark. It is an indicator of relative performance over time.

So common usage and long track record in the media make the total return index numbers more recognisable for most casual market observers.

There is also a case to be made (the reasoning for the switch to total return index when the NZX50 was launched back in 2003) that New Zealand’s sharemarket is dominated by low-growth dividend stocks.

So just measuring the price return wouldn’t be as good an indicator of underlying performance.

But Rob is unconvinced.

He invokes the late, great Brian Gaynor, who was also passionate about this distinction and sceptical about the use of total return.

Anyway, what do you reckon? Were you aware that the most widely publicised NZX50 index is not based on a pure price return?

Do you think it should be? Let me know in the comments ...

Nation of shopkeepers

Q: I think it’s high time that the distinction is made between being self-employed, ie a one-man band, and a small business.

There is an old saying about working on your business and not working in your business. Unless you are employing someone to work for you, then you don’t really have a business.

What are the stats for self-employed v true small businesses?

Warwick Dixon, Mangawhai

Hi Warwick,

I’m not sure I agree with that old saying.

But I take your point about there being some difference between contractors and employers with staff to manage.

For the record, Inland Revenue doesn’t make a technical distinction. But I can give you some interesting stats on the divide you are highlighting ...

Stats NZ’s annual Business Demography Statistics (as at February each year 2025) show there were 617,330 business enterprises in New Zealand.

Of those, 455,730 were sole traders, ie contractors with no employees. There were 101,253 businesses with 1-5 employees and 23,511 with 6-9 employees. There were 19,557 with 10-19 employees.

For the record, the Ministry of Business, Innovation and Employment classifies a small business as having fewer than 20 employees, although it also notes that there isn’t an official definition.

So it would classify 97% of all registered New Zealand companies as small businesses.

I guess, by your argument, 73% of New Zealand companies would be sole traders or self-employed (or some might be shell companies, to be honest). And just 23% are actually small businesses.

For the record, here are the rest of the data. Just 11,100 firms have 20-49 employees, 3342 have between 50 and 99 employees and there are only 2838 New Zealand businesses with more than 50 employees.

However you want to cut it, though, we are not a nation of corporate giants.

Don’t forget to check out the Herald’s new podcast, The Economy of Everything, with Liam Dann and Tamsyn Parker – thanks to CMC Markets.

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. **

For a step-by-step guide, click here. If you have a burning question about the quirks or intricacies of economics send it to liam.dann@nzherald.co.nz or leave a message in the comments section.