Business confidence is at its lowest since 1970.
In its December quarterly survey of business opinion, the New Zealand Institute of Economic Research says a net 44% of companies reported a drop in their activity in the final quarter of 2008.
This compares with a net decline of 32% in the previous quarter.
A net 43% of companies saying they expect general business conditions to worsen in the next three months, compared with a net 13% expecting a decline in the previous survey.
The institute says these are the worst figures since March 1970.
ANZ National Bank chief economist Cameron Bagrie says New Zealand is in for a rocky start to the year.
New Zealand has now been in recession for nine months.
Bank of New Zealand chief economist Tony Alexander expects the economy will be very weak for the next six months, and that people should focus on preserving their cash flow.
Mr Alexander says the country's recovery depends on what happens internationally.
The survey also found that 21% of businesses cut staff numbers in the December quarter, and that 32% of businesses expect to cut numbers in the next three months.
Businesses are finding it much easier to find skilled and unskilled labour, the survey shows.
ASB chief economist Nick Tuffley says the findings show how quickly and sharply the labour market has turned from extreme shortages to having a large amount of slack.
The Engineering, Printing and Manufacturing Union, one of the country's biggest, says many employers are requiring staff to take extended holidays over the summer break as a result of the worldwide downturn in consumer demand.