It's when people stop paying the bills that slower growth becomes worrying, when interest-bearing advances on credit cards start rising faster than overall balances or advances past 90-days due start to increase. We are not seeing that.
The "trouble" view of the economy is being shaped by various leading indicators and accentuated by political posturing.
Leading economic indicators such as business surveys on growth, investment and hiring expectations (we exclude business confidence from the group because it is politically biased) are a critical tool to assess where the economy is headed. They are timely and they need to be followed.
They are showing a clear slowdown in economic momentum. Investment intentions are worrying weak. Typically, the various surveys tend to be more concurrent than truly leading. They give a read on growth now, as opposed to the future.
It may well be that in the current instance they are more leading as firms really look to the future, which would explain why the readings are not translating into economic reality - yet.
But they are also sentiment-based indicators and can sometimes simply divorce from reality.
Xero's Small Business Insights data showed an economy performing well for the March quarter, when the data was first released in May.
The data showed similar readings for the June quarter and growth in real gross domestic product surpassed expectations.
Readings for July and August show the economy trucked along reasonably well, though with more caution apparent on the hiring front.
The data looks in the rear-view mirror. But getting paid and cashflow are the lifeblood of any business and any economy. When an economy slows, or hits the skids, you'd expect to see cashflow deteriorate and payment terms extended or drawn out. The movement is slow at first but gathers steam. Such movements are signals of a clear turning point of the worrying variety.
The average days overdue for an invoice is showing a decline. Businesses are paying their bills more quickly (or less late as invoices are paid, on average, eight days late). Average days to pay an invoice is showing an improving trend. Payment times have been falling across seven, 14, 20, 30, and 60-day payment terms. That's hardly the sign of an economy in trouble. In fact, it's the reverse.
The average firm sent out more invoices in August 2018 than August 2017. The dollar amount may differ, but more invoices typically means firms are doing more and that's called growth.
More firms were cash-flow negative in August than positive. At face value that's a worry. But August is provisional tax month for a lot of businesses and that can drain cashflow. What is notable is that fewer firms were cashflow-negative in August this year than in August 2017.
That being said, some elements of caution are apparent in the Xero Small Business Insights data, though. Hiring figures show a sharp deceleration in momentum.
Annual growth in employment has slowed to 5.4 per cent, still strong on the face of it, but a sharp slowdown on years prior when small-business employment was rocketing. Hiring has contracted in two of the past three months.
Growth in employees, per organisation, has slowed to be barely above zero.
Small business demand for staff is being tempered. This may reflect difficulty finding skilled labour (cited as one of businesses' biggest challenges) or uncertainty over the Government's labour-relations policy.
A battle royale is opening at present between cautionary leading indicators such as the ANZ Business Outlook Survey (softness in firms' own activity expectations, investment and hiring intentions), the New Zealand Institute of Economic Research Quarterly Survey of Business Opinion, softening consumer confidence, and an array of hard data indicators which still show good momentum. The former group are timely, whereas the latter comes with a lag.
Whether firms are paying the bills quicker or slower is one of the key pieces of hard data to watch. It may be a little behind the leading indicators, timing wise. But if the economy had softened up as much as the various surveys imply, you'd expect to see the time taken to pay a bill would be increasing and flagging a worrying turning point had been reached. That's not happened - yet.
That doesn't mean the economy might not have slowed up (it is in the process of doing so) or we can ignore some key risks. The global scene is worrying on that front, and businesses need more clarity from Government over economic direction.
But don't confuse a tempering in momentum, and clear risks on the horizon, with the use of the term downturn. That's a word that is being thrown around too much.
• Cameron Bagrie is the managing director of Bagrie Economics.
