Sweet and sour results hold recession clues

If you're only expecting socks for your birthday, then maybe underpants are a good result.

This reporting season is a bit like that. US investors are so starved of good news that they are feasting on crumbs and calling it a banquet.

A little bit of that is okay. Right now the financial world needs confidence and optimism. Eventually some of it might rub off on the banks and then things can really start to improve.

But let's face it, if a US investor who had been in a coma for the past two years were to wake up this week and go straight to the business pages to check his stocks, he'd probably ask the doctors to knock him out again.

On Thursday, Ford reported a US$41 million sales drop from the same period a year ago. After the write-off of debt restructuring costs it posted an operating loss of US$638 million. The result was cheered and helped send the Dow Jones over 9000 points for the first time since January. That's a pretty sour blend of good news.

In New Zealand this results season is likely to be even more mixed. Some companies - like Delegat's and SkyCity - have already signalled they are beating expectations. Even better, they are still making real profits.

Others may yet surprise on the downside. And worse than the losses is the spectre of balance sheet blowouts and debt woes that still haunts some companies on the NZX.

In the short term the game is all about beating market expectations. If companies manage their flow of news, then there is no reason why the NZX can't maintain its bullish run of the past few months.

But the results and the forecasts that accompany them also need to be read with a critical eye for what they tell us about the New Zealand economy.

Construction stocks like Fletcher Building, manufacturers like Nuplex and Steel & Tube and tourism-related companies like Air New Zealand, Auckland Airport and Tourism Holdings all provide a barometer by which we can assess how the country is faring under the weight of a global downturn.

So over the next six weeks or so let's play close attention to the words and numbers. They'll mean a lot to the investors in the companies that produce them. But this year they'll also tell us a lot about the depth of this recession. And hopefully something about how we are going to claw our way out of it.