Businesses in New Zealand say they are experiencing considerable disruptions due to the Middle East conflict and the resulting surge in oil prices, Westpac said in a report on Thursday.
Much of the momentum observed in economic activity before the war broke out has now stalled, and cost pressures and uncertainty have surged over the past month, according to the report.
"The impacts of those developments are extending well beyond transport costs, resulting in softer demand, concerns about supply security and increased economic uncertainty," the bank said. "That's on top of the broader pressure on operating costs, prices, and margins."
For many industries experiencing sharply higher fuel costs, including transport services, construction materials, forestry, and agriculture, it is currently difficult to pass cost increases on to customers due to a combination of complex pricing arrangements and soft demand, the report said.
Fertilizer importers have pointed to a material escalation in supply chain risk amid the conflict's impact on insured shipping capacity, and similar worries are emerging in meat exports, feed imports, and log shipping, "where two-way freight economics are breaking down," the bank said.
Westpac flagged forestry as particularly vulnerable, with many operators anticipating a sharp slowdown in harvesting, especially among small to medium-sized crews.
Meanwhile, tourism businesses are reporting cancellations and restaurants are reporting a drop in sales as uncertainty generated by the war is driving conservative consumer behavior and a focus on cash preservation, Westpac said.