Businesses 'have come through the worst'

Fairfax Media

WORST IS OVER: Moderation and Christmas shopping might be mutually exclusive terms, but they are exactly what the economy needs this year, National Bank economist Khoon Goh says.

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Moderation and Christmas shopping might be mutually exclusive terms, but they are exactly what the economy needs this year, National Bank economist Khoon Goh says.

The National Bank Business Outlook for November noted a drop in business confidence, from a net 48 per cent of businesses expecting economic improvement in October to 43 per cent.

Mr Goh said consumers, particularly those in the rural sector, had put away their wallets in the crisis, and some level of control needed to remain as the festive season started.

"As long as people don't go overboard and start racking up consumer debt.

"It is all about living within your means."

The survey showed the only increase in confidence was in the retailer sub-group, due to the anticipation of stronger till takes in the next month. Businesses felt they had come through the worst, Mr Goh said, but a level of cautiousness remained.

Investment sentiment was up a single percentage point to 6.8 per cent net positive.

Employment had a 5 percentage point jump, but was still in single digits.

Mr Goh said the improvement in hiring intentions showed a positive shift in thinking, but it was not going to be enough to catch the climbing numbers of job seekers boosting unemployment figures.

Equally, he said the investment sentiment was up, but still very low.

"Businesses are in a wait-and-see mode."

The strengthening in economic data was due to the "same old same old" housing sector, as Kiwis went back to what they knew, Mr Goh said.

That gave businesses scarce concrete evidence that the improvements were here to stay.

While the residential construction sector showed a slight upward move in the survey, commercial construction sank 36 percentage points to 11 per cent net positive.

Despite this the overall building sector showed the strongest sentiment, buoyed by the positivity around housing affecting the mood in builders, tradesmen and associated businesses.

Mr Goh said as the new year unfolded the economic crisis needed to be coupled with some tangible "learning" and hopefully new spending and saving behaviour between consumers and the Government.

The survey showed business owners had got a feeling for how the banks were reacting a year after the economic crisis hit.

The number seeing easy credit dropped from October, and a sharp rise in businesses expecting interest rate increases indicated financing would be a key concern over the medium term.

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