Business confidence consolidates as firms draw breath

Wednesday 28th October 2009

Business sentiment remains cautious but optimistic by comparison with the depths reached a year ago during the worst of the global credit crunch, according to the October National Bank Business Outlook.

The long-running monthly series is based on a poll of business customer responses and found that a net 48.2% expect better times over the next 12 months. October showed the strongest jump in improved profit expectations recorded for five years. A net 49.1% of respondents were optimistic about the next 12 months.

"It is hard to describe the readings as anything other than stabilising at elevated levels," said the bank's chief economist, Cameron Bagrie. "Balance sheet consolidation and de-leveraging continue to dominate."

Among the bright spots, the survey found export intentions slightly improved, suggesting recovery in global demand is more of a factor than the New Zealand dollar exchange rate in spurring export returns at present.

Agriculture remains at the pessimistic end of the scale, and the service industry showed the largest dip in expectations and employment intentions, and none of the aggregate lift in investment and profits seen in other sectors.

The construction sector, led by commercial rather than residential projects, was the most optimistic in October, with the strongest ranking for overall business confidence, own activity expectations, employment, profitability and investment, all of which were up sharply on last month, the bank said.

Inflationary pressure was beginning to emerge, although most worryingly the greatest pressure was from non-competitive parts of the economy.

Businesswire.co.nz

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