Thursday 30th October 2008
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A net 42% of businesses expect general business conditions to deteriorate in the coming year, down from a net 1.6% who predicted better times ahead one month ago, according to National Bank's Business Outlook survey for October. Profit expectations fell to a net minus 32% from minus 7.6%.
"We have yet to see the real economic ramifications of financial market ructions around the globe," said Cameron Bagrie, chief economist at National Bank.
The central bank has embarked on its steepest easing cycle since the official cash rate was introduced in 1999, with some economists predicting the OCR will fall below 5% next year, when the economy may be climbing out of recession. The Federal Reserve cut its benchmark to 1% yesterday, the second reduction this month, and speculation is mounting for the Bank of Japan to lower what is already the world's lowest benchmark rate.
The freeze across credit markets has already derailed some of this year's biggest deals, including PGW Wrightson's NZ$220 million investment in Silver Fern Farms, and prompted the central bank to arrange what amounts to a funding line for US$15 billion with the Fed. The benchmark NZX 50 Index has slid 33% this year.
National Bank's survey shows firms' own activity expectations fell to minus 11 from plus 17, the second-lowest level on record after it reached minus 19 in April 1988. A net 21% expect to have fewer workers, another record low. Export intentions fell to 11 from 29, even as the New Zealand dollar weakened.
Construction, both commercial and residential, both fell to lower than minus 30 and showed the weakest readings.
Statistics New Zealand figures today showed the trend for the number of consents for new dwellings, including apartments, has fallen 41% since mid-2007 to the lowest since January 1983.
Shares of Fletcher Building, the nation's largest construction company, fell 0.4% to NZ$5.59 and have tumbled more than 50% this year amid a domestic recession and slumping demand in the US.
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