Pessimism on the wane as media talks up downturn

By Paul McBeth

Monday 6th April 2009

Pessimism about the state of the New Zealand economy is waning, according to a monthly survey of confidence, suggesting businesses are experiencing better trading conditions than is portrayed in the media.

There are as many optimists as there are pessimists according to the monthly Bank of New Zealand Confidence Survey taken last week, which measures the expectations for the economy over the coming year among subscribers to its Weekly Overview. That's up from a net 23% of pessimists last month and the strongest result since optimists outweighed pessimists by 27% in September, just before the collapse of Lehman Brothers. The report noted there was still a high degree of uncertainty about the future.

"There were a large number of comments about the media over-playing the downturn" which might suggest businesses haven't experienced the dire conditions being portrayed, said chief economist Tony Alexander, in the report. "Some respondents note recent stabilising in their sectors, but others also fear that the recent gains may be short-lived."

The report comes before tomorrow's Quarterly Survey of Business Opinion by the New Zealand Institute of Economic Research, which may show a recovery from the lows plumbed in January, when business confidence tumbled to its weakest since at least 1970.

In January, a net 64% of firms expected the economy to deteriorate in the first six months of this year, and 32% of companies intended to cut staff in the first quarter.

Tomorrow's QSBO report may show activity remains weak as the economy continues to contract, but may suggest the downturn is close to the bottom of the cycle, according to ANZ National Bank economists.

"The last QSBO was the worst on record and so Tuesday's update may struggle to reach new lows. Nonetheless, a substantial rebound is not expected," said Danica Hampton, currency strategist at Bank of New Zealand.

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