Confidence keeps rising in bank survey

Business confidence has jumped with the National Bank Business Outlook survey for July recording its highest level since March 2002.

Overall, a net 19 per cent of respondents expect an improvement in business conditions in the year ahead, up 13 percentage points from last month's survey.

Companies' own activity expectations also improved. A net 13 per cent expect better times ahead for their own business, up from a net 8 per cent in the last survey.

Confidence improved across all sectors, with manufacturing posting the largest increase.

"Overall, this month's survey suggests that the light at the end of the recession tunnel may be just around the corner," said Cameron Bagrie, chief economist of National Bank.

But the bank is still cautious about the outlook, citing the impact of rising unemployment and falling rural incomes.

"The stubbornly elevated New Zealand dollar is obviously not doing our exporters any good," Bagrie said. He said challenges remained with the economy needing to rebalance.

A net 14 per cent of firms expected lower profits in the year ahead, while investment intentions improved from a net negative 6 per cent to a net negative 2 per cent.

A net 7 per cent of firms are still looking to shed staff but this is an improvement from a net negative 17 per cent in the previous survey. A net 74 per cent of firms expect the unemployment rate to continue rising.

A net 15 per cent of respondent still expect credit to be more difficult to obtain during the coming year.

There is a noticeable deterioration among retailers, where a net 29 per cent expect access to credit to be more difficult, up from 4 per cent in the previous month. The agriculture sector was also expecting credit to be more difficult to obtain.

National Bank said confidence improved in the agriculture sector but was still in negative territory.

"Rural folk remain the most pessimistic compared to other sectors," Mr Bagrie said.

UBS economist Robin Clements said it may still yet "be premature to focus on recovery when the economy is yet to officially exit recession and has to negotiate rising unemployment and a persistently strong exchange rate. In other words, a self-sustaining healthy recovery could be several quarters, maybe a year, away yet."


- NZPA