Talking ourselves into a funk?
The economy heading for 'stall speed'?
Falling expectations of inflation pointing to a need for further stimulus from the Reserve Bank?
Yep, there's plenty on the minds of the big bank economists this week as they view faltering global and domestic economic situations.
A powerful backdrop to the week ahead has been provided by the latest ANZ Business Outlook Survey, which was released late last week and showed business confidence levels and investment and employment intentions sagging to levels last seen at the height of the Global Financial Crisis.
The question of whether we are talking ourselves into a funk is directly raised by Kiwibank chief economist Jarrod Kerr and senior economist Jeremy Couchman.
"A lack of confidence among NZ firms has become a primary concern for the NZ economy," Kerr and Couchman said.
"Investment intentions are down, hiring intentions are down, and even firms' expected profitability was down [in the ANZ survey]."
The two economists also honed in on the ANZ survey's 1-year ahead inflation expectations measure, which fell to 1.7%, considerably adrift of the explicit 2% inflation target the Reserve Bank has.
"This is a worrying development for the RBNZ, with their own survey measure of inflation expectations falling sharply below the Bank's 2% target midpoint.
"If expectations become unanchored below the mid-point, the likelihood of further significant policy action by the RBNZ increases," Kerr and Couchman said.
They noted that financial market pricing had responded and there were now a little over 40bps of further interest rate cuts priced into market prices.
ASB senior economist Mike Jones noted, in relation to the ANZ survey, that NZ firms were "seeing an increasing risk the economy hits stall speed".
"We still think this outcome will be avoided given the support from a humming construction sector and the high terms of trade," Jones said.
"Still, the risks of a more protracted slowdown are rising."
It was hard to find "any cheer" in the ANZ survey, Jones said.
"Despite the encouragement from the RBNZ Governor [Adrian Orr], firms just don’t believe it’s a good time to invest.
"Who could blame them given the global gloom and signs of a turning in NZ’s economic cycle. As the chart [above] shows, the level of investment intentions suggests NZ economic activity is at risk of stalling.
"Our forecasts of a 2.5% [year-on-year] 2019 calendar year expansion look a tad lofty."
Westpac economists also felt the fall in businesses' inflation expectations was very important.
"Inflation expectations are a significant influence on how businesses adjust wages and prices, and as a result play a key role in determining actual inflation. The recent downshift in expectations means that the uphill battle the RBNZ has been fighting to generate a sustained lift in inflation has now gotten that much harder," they said
They noted that the next update on the RBNZ’s Survey of Expectations is due on 12 November.
"Although that’s just one day before the November [monetary] policy [and Official Cash Rate] decision, it’s important to remember that the RBNZ gets the results of this survey about a week before it’s released publicly.
"As a result, this survey could again have a big impact on the Monetary Policy Committees thinking, just as it did in August.
"This will certainly be a key event for markets to watch ahead of the November policy statement and could impact market pricing.
"We expect the RBNZ will cut the cash rate by 25bps in November, taking it to a fresh record low of 0.75%."