for activity in their own firms have fallen sharply for a second month, also down to a multiyear low. This tends to be a leading indicator for GDP growth, and points to a significant weakening in GDP growth over the coming year. “This result is consistent with the fears we’ve been expressing about the outlook for economy. It signals that the economy will need a significant shot in the arm over the coming year in the form of lower interest rates to boost both growth and inflation,” says Ranchhod. “Looking into the underlying details of the survey, the fall in sentiment has been very pronounced in the agricultural sector. This was expected given the recent falls in commodity prices – and we would expect an even greater decline in August, given the further weakness in dairy prices recently. “However, we’ve also seen business confidence falling very sharply in the construction sector, which has been the key engine of growth in recent years. This was the second month in a row that confidence in the construction sector has fallen sharply, making it harder to dismiss as noise. In part, this is likely to reflect that building activity in Canterbury has been peaking. However, the extent of the decline over the past two months does raises questions about the outlook for construction more generally, with a particularly sharp decline in sentiment among commercial construction firms. “Along with the drop off in confidence, businesses’ hiring intentions have continued to push downward. Investment intentions, in contrast, were more resilient. “While the activity components of the business confidence survey have fallen, pricing indicators have stabilised.”