Confidence reaches 10-year high

Exporters are expecting volumes to increase this year. Photo / Hawke's Bay Today

Businesses have started the year upbeat, with confidence hitting a 10-year high in the National Bank's latest survey.

When asked for a view of general business conditions over the year ahead 57 per cent expect them to improve and only 7 per cent expect them to get worse. The net 50 per cent positive is up from 38 per cent in December and the highest reading since April 1999.

"Positive confidence readings are only natural when you emerge from recession with ... an 'it can't possibly get any worse' attitude filtering through," the bank's chief economist, Cameron Bagrie, said.

"But we have been on an improving trend now for just under a year. Growth has followed. Admittedly it's not strong, but growth is still growth."

It was heartening to see sentiment robust despite some bad news since the start of the year including an unexpectedly steep rise in unemployment and evidence of the housing market hitting a wall, he said.

Firms' views of their own outlook, a more reliable economic barometer, also strengthened with a net 42 per cent positive, up from 37 per cent in December and the highest since November 1999.

A net 23 per cent expect higher profits in the year ahead (up from 16 per cent) and a net 9 per cent expect to be hiring (up from 6 per cent). Both of those indicators compared well with their long-run averages and augured well for for a broadening of the economic recovery, Bagrie said.

A net 31 per cent of exporters expect better volumes over the year ahead, up from 26 per cent in December.

But while the survey was pointing in the right direction there was more room for debate about the pace of recovery, Bagrie said.

"Going round the traps the feeling you get is that most are moving forward but it's pretty modest and gradual."

The picture the survey paints is not all rosy. Retailers recorded a fall in overall confidence, own-activity expectations and employment intentions. Official data showed that retail sales fell in December in a seasonally adjusted basis, and early indications are that January was no better.

FEELING CHIPPER

* 57 per cent of businesses expected conditions to improve.
* 7 per cent expected them to get worse.
* The net 50 per cent is a big rise from 38 per cent in December.