March NZIER QSBO: Wowsers

Ok, all I can say here is that this is a really bad result.

Everyone knew March was bad, the RBNZ said they expected a bad result, but the net 45% of firms expecting a fall in their own activity is an unconscionably bad result.  I must admit that I was a little surprised.

Now, all economists expect March to be the quarter with the sharpest decline – even before this result.  However, WOW.

One positive for me is that firms expect profitability and productivity to remain low.  This may sound weird – but with cost pressures expected to virtually disappear, firms that are willing to put up with falling productivity and falling profits are firms that aren’t going to lay off as many staff.  When we are only looking one quarter ahead, this is actually sorta good news.

Rates Blog discusses the result more here.

2 replies
  1. rauparaha
    rauparaha says:

    So, I’m curious how all these firms think that their prices will decline over the next quarter. If all prices decline then is that deflation? And will that actually happen? Cos that sounds bad.

  2. Matt Nolan
    Matt Nolan says:


    Deflation is only bad if wages are sticky – because then we end up with a “surplus” in the labour market.

    If it wasn’t for that, deflation would be intensely over-rated 😛

    Also note that deflation is a persistent rate of decline in prices – not a sudden drop in the price level.

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