Last week's unemployment figures were not as bad as many had picked, but economists are warning darker news is imminent when January house sales, electronic card transactions and December retail sales are released this week.
The ANZ forecasts static house sales as prices continue to come under pressure, credit and electronic card transactions to fall and headline December retail sales to fall sharply by 1.4% compared to November.
The ASB Business Weekly is picking flat fourth-quarter retail sales with housing being a buyer's market, monthly turnover down 20%-50% and prices on an annual basis back 5%-10%.
"It is a buyer's market and we expect price declines to reflect these conditions."
Westpac predicts January house prices to show a further decline, in line with the drop in December of close to 4.8%, with sale volumes for the month to be flat when seasonally adjusted.
The bank was also picking December retail sales to fall 0.9% and 1.1% for the December quarter, along with drops in electronic and credit card transactions.
Weak retail sales data showed households were "de-leveraging", which ANZ chief economist Cameron Bagrie said would lead to a fourth consecutive contraction in GDP which he believed would be 0.5%.
Banks were surprised at the strength of last week's household labour force survey which showed a rise in unemployment to 4.6% but also an increase in employment.
The ASB attributed the increase to more part-time employment, but restated the outlook was weak as the global economic outlook had deteriorated quickly.
The speed of that turnaround meant firms were coming under pressure to cut costs. Reducing staff was the next option.
"While more people in work is good news, given the extent to which labour market indicators in business surveys have turned, we are inclined to look through the result.
"The outlook for employment over 2009 remains weak, with the credit crunch pushing New Zealand further into recession.
"Businesses remain under extreme pressure and are unlikely to sustain labour hoarding for much longer."
The ANZ agreed, Mr Bagrie saying firms that had worked hard to get skilled staff during an era of tight employment were working equally hard to retain them, but they were working fewer hours as the economy contracted.
"To some extent the labour hoarding story is comforting to a degree as it implies employers and employees are being very flexible in managing the downturn."
He expected employment data to worsen, starting with the March quarterly figures and continuing through 2009 with 7% unemployment possible.
But he tempered that by saying much of that growth would come from people seeking to join the labour force rather than just people losing their jobs.
Westpac predicts the unemployment rate to hit 6.4% by the end of the year and said a 1.9% fall in hours worked in the December quarter suggested GDP for that quarter would contract more sharply than its earlier prediction of a 0.9% contraction.
