KEY POINTS:
More firms are planning to shed staff as monetary and fiscal stimulus fail to dispel the gloom that has engulfed them.
National Bank's business outlook survey, the first of 2009, found a net 41 per cent of firms expect harder times over the year ahead, 6 percentage points worse than in December.
Their expectations of their own activity have improved slightly, but only from the worst level in the survey's 20-year history to the second worst.
Asked about their employment intentions in the year ahead, 35 per cent expect to reduce staff numbers and only 6 per cent to increase them. The net 29 per cent negative compares with a net 22 per cent in December.
The bank's chief economist, Cameron Bagrie, said employment intentions were worse across all sectors except construction and either at or close to historic lows.
Investment intentions have also deteriorated to a new low, with a net 15 per cent of firms expecting to reduce investment.
"Against the backdrop of aggressive interest rate cuts, a falling currency and fiscal stimulus, it is perhaps disconcerting to see the aggregate message in the survey remain so poor," Bagrie said.
It was at levels consistent with the economy shrinking by more than 2 per cent.
"I guess the glass-half-full take on it is that it could have been worse."
The recession that started early last year had yet to trough, let alone show any signs of recovery. "What do we need to see to disperse this pall of gloom?"
Profit expectations were up marginally but still "perilously low", Bagrie said, with a net 41 per cent expecting lower profits over the year ahead.
But the proportion of firms saying they expect to raise their prices remains at historically low levels and inflation expectations have dropped sharply from 3.2 per cent in December to 2.7 per cent, a level last seen in mid-2004.
Sentiment was particularly weak in the retail sector, where a net 52 per cent of respondents expect their own activity to decline, a net 50 per cent expect to reduce staff and a net 65 per cent expect profitability to be squeezed.
Credit growth data released by the Reserve Bank yesterday show continued weakness in household borrowing and a rise in saving.
Households' borrowing increased just 0.1 per cent last month to be 3.8 per cent up on January last year. That compares with an annual growth rate of 12 per cent in household debt a year ago and 13 per cent the year before that.
Households' bank deposits, by contrast, have increased 13.6 per cent in the past year.
Dim view
* Firms' views of the general economic outlook has darkened.
* Their view of their own outlook is up a little, but still the second worst in the National Bank survey's history.
* Employment, investment and profit expectations have all declined.
