KEY POINTS:
Business confidence softened only slightly last month despite higher interest rates and and a sky-high dollar.
The National Bank's business outlook survey presents a picture of "nervous optimism", says the bank's chief economist, Cameron Bagrie.
A net 39 per cent of respondents expect general business conditions to deteriorate over the coming year, compared with a net 37 per cent of that view in June. Weaker confidence from manufacturers was offset by improved sentiment in the agriculture sector.
Respondents' expectations of their own firms' activity - a more reliable indicator - has also slipped slightly, with a net 12 per cent expecting an improvement compared with a net 15 per cent a month ago.
The long-run average for that indicator was between 25 and 30 per cent, Bagrie said. "So it's not flash but it's not a disaster either."
The business confidence component and other indicators in the survey pointed to economic growth of around 1.5 per cent over the next 12 months - a soft landing.
The bulk of the responses to the survey came in during the first two weeks of the month, so it captured the effects of the fourth official cash rate increase to 8.25 per cent, and a US78c dollar.
Export expectations, however, improved slightly despite the exchange rate. Investment and hiring intentions were unchanged, as were profit expectations.
"This resilience is even more remarkable when you compare the current responses to those in late 2005," Bagrie said.
That was a period when the Reserve Bank raised the OCR twice, from 6.75 to 7.25 per cent, and the dollar hit US70c. Business confidence collapsed and the "recession"' word was bandied about.
"The big difference this time around is the continuing surge in world dairy prices," Bagrie said.
"When you also consider that Government spending on infrastructure and other areas will continue to provide a floor for growth and the global outlook remains sound, there remain some good reasons for cheer."
The proportion of firms intending to raise their prices fell from 31 per cent in June to 28 per cent, the lowest in five months.
UBS economist Robin Clements interpreted the survey results as reinforcing the Reserve Bank's assessment that its four successive interest rate rises should be sufficient to contain inflation and generate the required "sustained period of slower growth".
Looking ahead
* Overall, pessimists outnumber optimists 49 to 10. The net 39 per cent gloomy is little changed from June.
* A net 15 per cent are positive about their own outlook, pointing to a soft landing ahead.
* Investment and hiring intentions have held up.
* And fewer firms expect to raise their prices.
