Outlook recovers after attacks

By BRIAN FALLOW

Business confidence has rebounded this month, to end the year back where it was before the terrorist attacks of September 11.

The National Bank's survey found slightly more pessimists than optimists about the general outlook for the year ahead, a net 2 per cent, but that is up sharply from a net 18 per cent negative last month and fully recovers from the fall since September 11.

Firms' views of their own outlook have also brightened to a net 28 per cent positive, from 16 per cent last month.

"It is now bang-on its historical average and consistent with an economy growing at its potential rate of 2.5 to 3 per cent next year," said National Bank chief economist John McDermott.

Investment and hiring intentions have also improved, as have expectations for exports and profitability.

The rebound in confidence, which follows a recovery in consumer confidence in the most recent Colmar Brunton survey, may have a seasonal element of Christmas cheer about it, Dr McDermott said, but there were solid reasons for sentiment to improve.

Many forecasters were expecting a recovery in the world economy early next year, a view reflected in world sharemarkets.

But the evidence was not unequivocal. "The prospects for an early recovery have been dented by a further fall in US consumer confidence, the Enron bankruptcy and a worse-than-expected US unemployment report."

On the other hand, the situation in Afghanistan seemed to be settling down, Dr McDermott said, and the policy ingredients for an economic recovery were in place.

In New Zealand, the rebound in confidence was most marked in manufacturing and construction.

Manufacturers are taking a rosier view of the economy's and their own prospects, but their investment and hiring intentions have weakened.

A net 21 per cent of construction firms expect activity to pick up over the next year. Last month, pessimists were as numerous as optimists.

The agriculture sector has the greatest preponderance of respondents expecting things to get worse, unsurprising given that it is coming off a bumper year for farmers.

Sentiment among retailers has improved from a net 11 per cent expecting deterioration a month ago to a net 3 per cent now.