Local firms are the gloomiest about their own businesses that they've been since the depths of the global financial crisis and economists don't expect much, if any, growth in the first half of this year.
ANZ economists published a flash reading of the bank's monthly business confidence survey to give a more timely update on economic indicators. The survey captured the first week, with 242 respondents, and will form part of the full report at the end of March.
It showed a net 12.8 per cent of those surveyed expect their own activity to decline in the coming year – the weakest reading since March 2009 – and turning around a net 12 per cent predicting increased activity in February.
Firms also got gloomier about the wider economy with a net 53.3 per cent expecting worse times ahead, compared to 19.4 per cent in February.
"Businesses are, quite rightly, very concerned about the potential impacts of the global covid-19 outbreak, with alarm about the prospects for exports particularly marked," ANZ Bank New Zealand chief economist Sharon Zollner said in a note.
The survey's own-activity measure typically has a stronger correlation to economic activity.
Bank of New Zealand market strategist Jason Wong said indicators such as the business outlook survey were more useful than formal data that pre-dated the outbreak, and were "telling us we're in recession."
BNZ economists predict New Zealand would slip into a technical recession – when there are two quarterly contractions.
The kiwi recently traded at 63.27 US cents, up from 62.49 cents late yesterday.
The greenback has been under pressure over the past week after the US Federal Reserve cut its key interest rate in response to the global outbreak of covid-19.
Wong said that was near-term support, and that the New Zealand dollar typically gets weaker in a global recession, which was "looking likely by the day."
He said he expected the local currency will drop below 60 US cents – it last traded below 60 cents in 2009.
BNZ economists are an outlier in calling a technical recession.
Finance Minister Grant Robertson said yesterday that he hadn't received any advice that the economy would tip into recession, while acknowledging that any growth would be challenging.
ASB Bank economist Jane Turner shied away from calling a recession. She has forecast a 0.1 per cent contraction in the first quarter followed by 0.1 per cent growth in the second – effectively netting out at zero.
"We're skirting it. But if some people are calling a technical recession, I wouldn't be surprised," she said.
She said the weak preliminary reading in the ANZ survey highlighted the risk, but that the outlook was too murky given how quickly the outbreak was moving.
Turner said the government's targeted fiscal response would be the most effective support for the local economy.
"That will be important to make sure any impact is a short sharp shock," she said.
A separate ANZ survey released today showed a decline in traffic movement in February, which Zollner said indicated activity remained largely "business as usual".
She said there were more marked falls in areas where logging trucks made up a bigger proportion of the heavy traffic index, which tracked the abrupt forestry slowdown last month.