The NZ Institute of Economic Research's influential Quarterly Survey of Business Opinion (QSBO) has found that a net 16% of New Zealand businesses are looking to shed staff over the next quarter.
The survey was conducted up to March 20, so doesn't include the impact of the lockdown.
But even so, it is predictably gloomy.
The reading for future hiring intentions is the weakest it has been in this survey since June 2009, while the overall reading for the business confidence is the weakest since December 2008.
NZIER says the survey is being issued in "extraordinary times".
"The QSBO shows a sharp decline in business confidence, with a net 67% of businesses expecting a deterioration in general economic conditions.
"When it comes to demand in their own business, the weakness was most apparent in firms’ expectations for the next quarter. A net 11% reported weaker demand in their own business in the March quarter, but a net 13% expected weaker demand in the next quarter – a marked turnaround from the 5% of businesses who had expected an improvement in demand in the previous quarter.
"A net 16% of firms plan to reduce headcount in the next quarter. Investment plans for buildings and plant and machinery have also been curtailed, with a net 15% and 7% planning to reduce investment in these areas, respectively."
NZIER said although the pessimism was broad-based across the sectors, the services sector was particularly pessimistic. A net 76% of services sector firms expect weaker economic conditions over the coming months. With firms in the services sector pessimistic about the outlook for demand ahead, a net 19% are looking to cut staff numbers.
Manufacturers were also downbeat, but there was a divergence between weaker domestic demand and stronger export demand in the weeks leading up to the lockdown in March. But a net 10% of manufacturers expect export demand to deteriorate in the June quarter. With the majority of the global economy shut down with a range of measures aimed at curbing the number of COVID-19 infections, economic activity has dropped sharply and there are widespread expectations of a global recession. This will have a negative impact on global demand for our manufactured exports.
NZIER said prospects for the building sector are mixed, with the measure of activity in architects’ own office pointing to a soft pipeline of residential and commercial construction, but a still-solid pipeline of Government construction work. The Government is expected to play a greater role in construction work as private investment weakens and has indicated its intention to accelerate any ‘shovel-ready’ infrastructure projects that can start within the next 180 days.
"There has been more discounting in the retail sector as demand weakened. The impact of the lockdown will be severe for most retailers which are not deemed essential, given it largely removes any opportunity for sales revenue."