Liam Dann: Recovering, despite symptoms

Anyone who has raised children will recall those feelings of despair when, after emerging from two weeks of colds and runny noses, the family are struck down by a stomach bug or some other fresh ailment.

When immune systems are low we are especially vulnerable to a second wave of illness. Parents just have to suck it up.

But what about economies?

We're not in a double-dip recession but there are plenty of gloomy statistics and anecdotal evidence to suggest that parts of the domestic economy have been hit by another bout of credit-crisis sniffles.

Small retailers, manufacturers and the owner-operator end of the building and property sector appear to be suffering the most.

That's a big chunk of the domestic economy and it is the part that grew the most during the credit boom.

Perversely, corporate results this week have been remarkably upbeat. Air New Zealand, Nuplex, Ebos, Auckland Airport, Vector and many others have surprised the markets where investors have tended to look through the fallout from the global financial crisis and looked forward.

We also see the export-led recovery holding up pretty well - dairy prices are off a bit but still at historically solid levels and the volume of product going through the Fonterra factories is high.

Log exports are generating more cash for the economy than they have in almost 20 years and even some of the big retailers, such as Progressive foods, are reporting strong results.

It looks like we've got an economy running at two speeds again.

Last time this happened the export sector was struggling as the domestic economy continued to boom - even through the financial crisis and recession - with cheap credit still pumping through its veins.

Now it is the other way around.

This isn't surprising to economists, who shrug their shoulders and say "that's what needed to happen".

They are right, of course, but that doesn't make it pleasant. When shops close and businesses fail it destroys livelihoods. But it is likely to get even more unpleasant at that end of the economy before it gets better.

At its heart the crisis was about Westerners spending more than they could afford.

Less lending means less spending which means less shops, less building. Meanwhile, the beneficial effects of good conditions experienced by the commodity export sector are going to take time to trickle through to the domestic economy.

That's because many farmers are still deep in debt and need to pay that down before they head to town for new tractors and so on.

Returning to that medical theme, there is no doubt that New Zealand is still suffering deeply from the symptoms of the global financial crisis. But that doesn't mean the recovery has stalled.

Follow Liam on twitter.com/liamdann