Finally - it's time for that new pair of shoes

Is a roaring trade in steam puddings, high heels and cheap beer the first tiny glimmer of a recovering economy?

After the first positive GDP announcement since early last year, the Weekend Herald investigated which, if any, parts of the economy showed signs of bouncing back. Operators in every industry said they were still "treading water" and expected a long road to recovery.

But some stories of growth have begun to trickle through.

Retail

"Irrational purchases" have increased as suggestions the recession was ending encouraged more spontaneous spending.

Heart of the City chief executive Alex Swney said sales of women's footwear had "gone through the roof" in July and August as the economic downturn seemed to loosen its grip. Purchases of "small pleasures" such as lipstick rose. But it is not only low-cost items that have sold well.

Smith and Caughey's on Queen St reported much improved sales in designer brands last month, especially in men's suits. Rising immigration has contributed to improved retail sales, and listed retail companies such as Briscoes and The Warehouse have posted better-than-expected results.

The Retail Association said these results showed the recession had turned a corner, but challenges remained for smaller retailers with less-diversified product lines.

Hospitality

Sales of low-cost items - food, liquor and takeaways - have remained strong in Auckland's central business district.

Valerie Davis, manager of Belgian beer pub The Occidental on Vulcan Lane, said the cheaper end of her menu had sold well throughout the recession, and business had picked up since mid-year.

This was in line with figures which showed food and liquor purchases increased by more than 5 per cent in the downtown area last month.

Hospitality Association chief executive Bruce Robertson said New Zealanders felt they could justify small food transactions in tougher economic times. "People have been hunkering down, dining in more on pizza and beers, and looking for good value propositions."

He said there were no indicators of a significant increase in sales, but "positive noises" since the encouraging GDP announcement could influence consumers' spending habits.

Tourism

Tents and motorhomes have become favoured accommodation as hotel occupancy rates and corporate events have plummeted.

The entire tourism industry has struggled since international bookings began to fall late last year. It remains in a cloud of uncertainty because a trend for late bookings makes it impossible to predict whether business will improve in summer.

The Agrodome, a farming theme park in Rotorua, had a 20 per cent decline in visitors when the recession and swine flu fears scared off Southeast Asian bookings. But a solid South Island ski season and resilient backpacker industry have given the Tourism Board reasons for guarded optimism.

At Mt Maunganui Beachside Holiday Park, bookings were as strong as ever, said manager Kathryn O'Brien. Tourism Holdings chief executive Grant Webster said travellers who "traded down" to cheap accommodation tended to splash out on activities, especially in the adventure sector.

Construction

Master Builders Association chief executive Warwick Quinn remains cautiously optimistic that the worst of the recession is over. He said interest rates were low, house prices had stabilised and numbers of migrants had increased. "Put together it's all a positive and there's no reason to think it will get any worse."

He said new projects next year could be in the order of 19,000 - an increase of 25 per cent. He had lingering concerns, as unemployment expected to peak next year resulting in fewer people wanting to commit to new houses. Consents hit a low of 14,000 in June.

Several builders the Weekend Herald spoke to were nervous about their short-term survival.

A Hamilton builder said there were plans for developments and houses but too much competition for the contracts.

Manufacturing

The outlook for manufacturing is bleak, as the high value of the New Zealand dollar is stifling exports.

"We are not staring at the abyss," said Employers and Manufacturers Association spokesman Bruce Goldsworthy. "But it's hard to see the light at the end of the tunnel."

He said many companies were retaining only skilled staff as they adjusted output to meet falling demand.

Companies which have remained competitive in the downturn are those trading with the stronger Australian market or exporting food products.

"People need to eat - that's not going to cease," said Old Fashioned Foods chief executive Ross McKenzie. His company ships two containers of Aunt Betty's steam puddings a week to England.

GOOD NEWS WEEK
* New Zealand climbs out of recession with a 0.1 per cent rise in GDP growth
* Fonterra lifts its forecast payout for the season by 13 per cent - a boost that will inject $700 million into the economy
* The New Zealand Superannuation Fund recoups its billion dollar losses growing by more than 33 per cent since March
* The current account deficit shrinks by $1.5 billion in the June quarter
* Consumer confidence jumps to a four-year high