Business sentiment keeps improving in November

ANZ National chief economist Cameron Bagrie. Photo / Mark Mitchell

Business confidence across New Zealand is improving, according to a new survey showing 33 per cent of businesses expect better times over the coming year, up 9 points from the month before.

The National Bank's Business Outlook Survey has just been released and shows an across the board improvement in business confidence during November.

Seasonal factors play a "mild role" in business sentiment, said National Bank chief economist Cameron Bagrie.

When these influences were adjusted for, business confidence showed a 15 point lift, from +10 to +25.

The survey shows those expecting better profits in the next 12 months rose to 15.4 per cent from 9.5 per cent, while those expecting to hire more workers rose to 11.5 per cent from 7.6 per cent and investment intentions gained to 6.6 per cent from 3.6 per cent.

Ease of credit surged to 10.7 per cent from 1.5 per cent.

The survey also shows better sentiment in residential and commercial construction with a net 31 per cent and 6.2 per cent respectively expecting a pickup in activity, compared to 8.5 per cent and minus 15.8 per cent in the previous month.

"Last month's mild turn upwards now shows signs of having legs," said Bagrie, with "a perkier tone" apparent across the entire survey.

"Firms' perception towards their own business continues to strengthen. A net 35 per cent expect better times for their own business over the year ahead, up four points on the month prior."

"Such levels are a far cry from flagging an economy that is off to the races. You need to walk before you can run. Such readings merely take sentiment back to where it resided around June and July," said Bagrie.

"But every journey starts with small steps. October was the first tentative step. November has seen this lengthen to a stride."

Goldman Sachs economist Philip Borkin said the survey provided "further "soft" evidence that the economy is rebuilding momentum after a soft mid-year."

Borkin said this was the fourth consecutive month where firms were reporting better prospects for their own activity.

"Taken at face value, this suggests GDP growth potentially rising to around 3.5 per cent year-on-year by early 2011."

"However we would note that the survey has suggested stronger rates of growth than have actually transpired in the recovery to date," warned Borkin.

"But beyond the headline figures, it was generally a solid survey across the board. All the gauges one would hope would be improving at this stage of the cycle (investment, employment, profits) all did."

"Like the improvement seen in the survey in the previous few months, we now have to wait to assess whether or not this flows through to the hard data."

Despite the warning that the National Bank Business Outlook survey had not proved to be the best indicator of the pace of recovery to date, Borkin said he "welcomed the messages contained within the survey that the economy is rebuilding momentum after a soft patch mid year."

Pricing intentions continue to weaken, according to the survey, with a net 18 per cent of businesses expect to be raising prices over the coming year.

- HERALD ONLINE / BUSINESSDESK