Firms are looking ahead with trepidation for the general economy, and they are looking at their own prospects much more negatively now too. It's a widespread malaise

Business sentiment is ending the year at near a record lows.

Not only are firms looking ahead with trepidation for the general economy, they are looking at their own prospects much more negatively now too.

The ANZ Business Outlook Survey reports have never been this negative, except in the pandemic.

ANZ says the RBNZ appears to have achieved shock value with its sharp increase in the OCR, hawkish forecasts, and warning of deliberate recession in 2023. Many indicators are around Global Financial Crisis (GFC) lows.

Inflation pressures remain intense. Wage expectations jumped.

Wage growth is the key driver of non-tradable inflation. Reported past wage settlements were steady at +6.7% in December with a large surge in the retail sector, but a decline for manufacturing.

Each three months ANZ asks firms what their biggest problems are. Finding skilled labour remains the clear #1, but has definitely eased. Interest rates jumped the most compared to the last survey in September, but still rate well behind other costs.

The largest retreats were the fall in investment intentions and employment intentions, consistent with increased concern about the economic outlook. Pricing intentions remain the most dramatically above their historical average, with expected profitability the most under par.

Among firms intending to invest more, skilled labour shortages and the domestic economic outlook are the key drivers, with spare capacity reducing as a factor. Among firms intending to cut their investment, the biggest factor is the domestic economic outlook, but interest rates are increasing in importance.

ANZ said: "... if the Reserve Bank was going for shock value, they appear to have gotten it. The fall in business confidence is certainly dramatic, but while it’s at a fresh record low, it would be incorrect to read this as an indication that any recession is likely to be unusually severe. Rather, it’s unusually widely anticipated. It’s a situation unprecedented in recent decades for a central bank to admit it is deliberately engineering a recession."