Business confidence in May is up, but still remains bleak due to the Covid-19 pandemic.
Photo: RNZ /Dom Thomas
ANZ's full-month survey shows headline confidence at a net 42-percent pessimism level from 67-percent last month.
The more closely followed own activity measure improved by about three points to a net 39 percent.
All the main activity indicators - exports, profits, investment, and jobs - showed modest improvements, but were still deeply negative.
Forty-two percent of businesses said they intend to cut staff and the net percent of firms saying they now have fewer employees than a year ago held steady at a net 36 percent.
ANZ chief economist Sharon Zollner said while outright disruption is easing, the recession is just starting to hit.
''And so the levels of all the activity indicators on our survey are still pretty grim and we would ned to see the own activity measure increase another 17-points just to get back where it troughed in the last recession.''
Zollner said businesses are starting to realise the economy is just at the beginning of a long and difficult road ahead.
''Not surprising to see negativity across the board but we saw the retail sector as the most pessimistic about the outlook for their own activity with a net 45-percent of firms expecting it to be lower and that I think reflects it's really the labour intensive parts of the economy which are taking the biggest hit.''
Zollner believes the economy is past the lows for Gross Domestic Product (GDP) growth for activity itself because you can not get much lower than a level four lockdown.
''Clearly we are only at the beginning of the recession and in particular the increase in unemployment which will have been pushed out because of the wage subsidy, so while in Q3, that's the September quarter things will be better. I think the honeymoon, the celebration of the fact we have dodged this Covid-19 bullet maybe fading and the reality of the recession may be kicking in.''
''It is going to be long-haul out of here because just the loss of tourism alone could shrink GDP by 5 percent, so we do have to be realistic that a return to normality doesn't mean a return to the activity levels we had before,'' she said.
ASB's quarterly economic forecast predicts a 3.2 percent year over year contraction in GDP growth in 2020, unemployment above 9 percent and house prices to fall just over 6 percent.