Tumbling business confidence pauses for reflection

By BRIAN FALLOW economics editor

Business confidence, which fell off a cliff last month, has landed on a ledge.

In the National Bank's November survey, pessimists outnumber optimists by almost the same margin, a net 18 per cent compared with 19 per cent last month. The bank's chief economist, John McDermott, said the survey results' pessimistic tone seemed at odds with anecdotal evidence suggesting that things were not that bad at the moment. But the key phrase was "at the moment".

Businesses realistically expected the synchronised global slowdown would eventually affect New Zealand.

The agricultural sector was the most pessimistic, both about the general outlook for the next 12 months and about its own activity.

Dr McDermott said that reflected the realistic expectation that the mix of high commodity prices, low dollar, low interest rates and good growing conditions would not last.

Manufacturers had also scaled back expectations about their own activity and exports.

But overall, firms' expectations of their activity, profits, exports and capacity use were little changed or slightly weaker than last month.

Investment and hiring intentions had risen slightly.

The building sector showed the biggest turnaround in hiring intentions, from a net 5 per cent last month expecting employment to fall to a net 6 per cent now expecting a rise.

"The turnaround in migrant flows, together with lower interest rates, has increased the demand for housing," Dr McDermott said.

A net 10 per cent expected residential building to increase. Last month, 3 per cent expected a fall.