Survey shows economic optimism at a record level

OPINION: Each month we survey the 20,000 people receiving the BNZ Weekly Overview (email me at tony.alexander@bnz.co.nz to receive it) and ask whether they think the economy will get better or worse over the coming year, writes Tony Alexander this week.

The survey last Thursday night showed a net 42 per cent of respondents think things will improve. This is a record high and appears to reflect a combination of some feeling things surely cannot get any worse, plus a few businesses, spread across a wide range of industries, seeing a few more customers recently.

People also submit comments on how things are going in their company or industry. The industry with the most obvious improvement is residential real estate. We have long held a less dire view for this sector than other forecasters and that view has been borne out, with activity soaring from February and at least two price series from REINZ and Quotable Value New Zealand now showing average prices rising in recent months.

Respondents noted in our survey that listings remain in short supply, there are increasing numbers of multiple bidders, and prices are seeming to improve here and there.

This real estate improvement now appears to be generating the upturn in residential construction we started writing about in March-April.

Builders have noted an increase in interest from customers though with caution still dominant and many people reluctant to commit because of employment worries.

So there is most definitely not a construction boom just around the corner, but things are starting to improve. That just goes to reinforce our warning that if you are planning to get something built, get it done now because the intense labour shortages we saw a couple of years ago in the building sector will return probably over 2011.

In manufacturing, conditions remain tough but a few businesses are seeing improving orders. Even a few tourism operators noted things seem okay, but their comments were outweighed by those who still fear worse to come in the next few months.

In farming, conditions remain very tough, most obviously in dairying, with suppliers to the farming sector noting wallets are well and truly closed.

Retailers report still very mixed conditions. though with more of a hint of improvement in this survey than in any other for a long time. The same goes for responses from those in the finance sector who are noting a slight improvement in enquiries. Human resource companies have also noted some improvement though largely in areas of high skills and executives.

The ICT sector seems in reasonable shape, though amazingly patchy, while in forestry, times would be truly appalling were it not for improving demand from China.

The results are in line with the "green shoots" theory of things slowly getting better, but they do not realistically provide a basis for anyone to say strong growth lies just around the corner in New Zealand.

Companies still have debt and cashflow issues, offshore demand is still weak, the rising exchange rate is a clear restraint, and fixed interest rates continue to chug higher, as we have been warning since March.Tony Alexander is chief economist of the Bank of New Zealand (BNZ).

» Tony Alexander is the chief economist for the Bank of New Zealand.

- © Fairfax NZ News

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