The business confidence index fell to 32.5 from 59.2 in February, ANZ Bank New Zealand said Tuesday in Wellington. That’s the lowest since July 2024. A gauge of firms’ own-trading fell to 39.3 from 52.6.

The mood swing adds to signs that New Zealand’s economy may stall in the middle of the year as rising fuel costs hit household spending and uncertainty about global demand damps hiring and investment intentions.

Some local economists are forecasting gross domestic product will contract in the second quarter while unemployment is now expected to stay high for most of the year.

“Just as the economic recovery was starting to feel real, dark clouds have gathered,” said Sharon Zollner, chief New Zealand economist at ANZ in Auckland. “It’s not just anxiety about the future. Many firms are already reporting that their activity has taken a hit as people defer their decision-making in the face of uncertainty.”

New Zealand’s economy experienced a recession after contracting in the second and third quarters of 2024 as the central bank battled a post-Covid inflation spike with high interest rates.

The pessimistic view from companies mirrors a slump in consumer confidence to a 17-month low as fuel prices soar and there are signs cost increases will spread through the economy.

The Reserve Bank, which next meets to assess the level of the Official Cash Rate on April 8, has said it will look through the near-term spike in inflation but will be vigilant about second-round effects on broader prices and wages that may lock in higher inflation expectations.

Today’s report shows more firms expect higher costs in the next three months, while a net 60% expect to raise prices. One-year ahead inflation expectations rose to 3.08%.

Companies were more gloomy on the outlook for profits, with a net 19.7% expecting higher earnings in the next 12 months, from 32% in February. A net 9.4% expect to hire workers, down from 22% a month earlier.