Business sentiment delicately balanced

By BRIAN FALLOW

Business sentiment is finely balanced between optimists and pessimists - there was only one vote in it in the National Bank's November survey.

And the proportion expecting general business conditions to remain the same over the coming year, 58.6 per cent, is the highest for five and a half years.

This survey continued the improving trend of the previous two months.

National Bank chief economist Dr John McDermott said the rebound in confidence, together with other indicators, suggested that after a brief pause in the September quarter the economy was back on track and growing at its full potential.

The improvement was marked across all sectors except agriculture. "Our appreciating currency and cold weather are weighing on farmers' minds."

Profit expectations have improved but hiring and investment intentions are flat.

Commercial construction expectations shot up to a four-year high.

Firms are pinning hopes on the domestic economy. Their expectations for their own activity strengthened to a net 31 per cent positive from a net 23 per cent last month, but expectations for export volumes fell.

"They seem to be encouraged by strong domestic indicators, while the disappointing world economy is old news," McDermott said.

Old news or not, the "unruly" global economy was a significant risk to New Zealand's growth.

In addition to the bear market and dented consumer confidence in the United States, growth in the euro zone had been disappointing and the Japanese economy remained fragile and dependent on export markets, McDermott said.

And the worsening drought in New Zealand's largest export market, Australia, was an increasing concern.