Business optimism keeps improving

By BRIAN FALLOW

Business confidence improved this month, continuing its recovery from the head-in-the-hands lows recorded by the National Bank's business outlook survey in May.

In its latest monthly survey a net 19 per cent of respondents expect the general business situation to worsen over the next 12 months, compared with a net 34 per cent pessimistic last month and a net 44 per cent the month before.

National Bank chief economist John McDermott sees the improvement as continuing last month's trend, as concerns about war in Iraq and the Sars virus dissipated and interest rates fell.

"Even the exchange rate, though very volatile, has come off that 60USc peak it spiked to and there's some hope the excitement in that market will be tempered."

Sentiment was still subdued, however, McDermott said, or downright despondent in the case of the agriculture sector, with a net 68 per cent of firms expecting deterioration.

The survey's question about the outlook for firms' own activity recorded an improvement, a net 20 per cent expecting an improvement, up from a net 10 per cent last month.

Expectations for export volumes (not receipts, which are hostage to the exchange rate) improved in all sectors except construction.

Profit expectations improved, along with investment and hiring intentions.

McDermott attributes the lift in the own-activity indicator to the general rebound from a very weak June quarter.

"By contrast the September quarter is not that bad. It's respectable growth," McDermott said.