(RTTNews) - New Zealand saw a continued contraction in domestic trading along with easing pricing intentions in the fourth quarter of 2008, according to the New Zealand Institute of Economic Research (NZIER) quarterly survey of business opinion. The survey results revealed marked weakness in the domestic economy, which increases the probability of further rate cuts by the Reserve Bank of New Zealand.

New Zealand’s GDP may have declined again in the fourth quarter, resulting in negative economic growth for the whole of 2008, according to the survey. The survey results also showed that business confidence indicators deteriorated in all the four sectors, namely manufacturing, construction, merchandising and services.

A net of 64 percent companies surveyed in the December quarter expect business conditions to deteriorate over the next six months compared to a net of 19 percent in the September quarter. Seasonally adjusted, a net of 77 percent expect business conditions to worsen in the next half year, compared to a net 24 percent in the September quarter.

On a seasonally adjusted basis a net 44 percent of firms reported a drop in their own activity in the December 2008 quarter, which is the worst result for this indicator since at least 1970. A net 43 percent of firms reported they expect a drop in their own activity in the March 2009 quarter, which is the worst result since at least 1970 for this indicator also.

A net 3 percent of firms reported they intend to reduce selling prices in the next three months. The last occasion a net balance of firms intended to reduce selling prices was December 1998. The net balance expecting an increase in costs has fallen from 52 percent in September to 27 percent in December.

A net 90 percent of financial services firms expect interest rates to be lower over the next 12 months than in the past year. This figure is the highest since September 1991.

A net 32 percent of firms intend to cut staff over the next three months. This figure is the highest since June 1991. There has been a notable easing in the difficulty of finding skilled and unskilled labor. A net 20 percent of firms reported it had become easier to find skilled labor and a net 43 percent that it had become easier to find unskilled labor. These figures are both their highest in 17 years.

In the December 2008 survey, capacity utilization was 88.8 percent, which is the lowest since June 1999.

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