According to the NZIER survey, net 9% of companies now want to reduce the number of employees.
The New Zealand Institute of Economic Research’s latest quarterly survey of business sentiment is the “worst of all worlds”, the BNZ says.
It suggested that profits have “collapsed” and hiring intentions have fallen, but that cost pressures for businesses remain extremely high, labor shortages are extreme and their expectations of rising prices are higher than ever, the bank said in a note. research.
“Everything is starting to look like stagflation on steroids.
“There are no signs that inflation is easing in any significant way, but the survey lends additional weight to our long-standing argument that the economy is headed for recession. Moreover, that recession could come faster and be much deeper than many want to believe.”
Kiwibank agreed that a drop in business confidence made a recession more likely and indicated that businesses had been spooked by the Reserve Bank’s tough talk and action in November.
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Business confidence fell to its lowest level since the NZIER began tracking sentiment, on a seasonally adjusted basis, in 1970.
NZIER said the survey made for “bleak reading”, with a net 73% of businesses expecting conditions to worsen in the coming months.
“Business confidence is the weakest in the history of the survey,” said NZIER chief economist Christina Leung.
“Companies have become much more cautious and now want to reduce the number of employees.”
The World Bank warns that the global economy is on a “razor’s edge”.
A net 9% expected to cut staff early this year, the NZIER found.
But acute staff shortages continued to suggest wage pressures would remain high over the next year, it also said.
A net 13% of companies surveyed by NZIER also reported a fall in their own business activity during the previous quarter, the weakest result since the June 2020 quarter when companies were pushed into Level 4 quarantines due to Covid.
A larger share, net 33%, expects a decline in their own activity in the next quarter.
“Companies have also significantly scaled back investment plans, particularly when it comes to building investment,” NZIER said.
Retail businesses were feeling “very depressed”, it found.
ANZ said the “major concern” in the data was that it showed an increase in costs and prices in the last quarter and the current quarter.
“It goes in the wrong direction and suggests that near-term inflationary pressures remain acute and too high for the Reserve Bank to call these data ‘comforting’,” it said.
The survey was conducted between November 28 and January 9, so it recorded the impact of the Reserve Bank’s tough monetary policy statement on November 24 and its governor Adrian Orr’s admission that the central bank was trying to cause a recession to tame inflation.
Leung said the research points to an increased risk of recession.
The gloomy mood comes after evidence that businesses have, at least until recently, enjoyed high profits, with the Inland Revenue making a whopping $19.9 billion in company tax in the year to June.
That was 31% more than in 2019, the last full year before Covid, and 80% more than the $11.1 billion companies paid in company tax in 2016.
Despite speculation that higher profits are mostly concentrated within large corporations, an IR spokesman said the bigger story for 2020-21 is was “very strong business profit in all segments”, except in those sectors that were greatly disrupted by Covid-19 and closed borders.
The tax law prevents the IR from providing detailed information about the source of the company’s profits.