Magazine article New Zealand Management

Economics: Better Times Ahead?

Magazine article New Zealand Management

Economics: Better Times Ahead?

Article excerpt

Byline: Bob Edlin

Hints of an economic recovery early in the new year, albeit tentative, were dissipated when the second devastating earthquake rocked Canterbury in February.

Some sectors did expand in the March quarter -- retailers, wholesalers, manufacturers and primary industries, for example -- but nationwide business and consumer confidence slumped, business activity in Christchurch was severely disrupted, and tourism flows through Christchurch and the South Island evaporated.

Two surveys in mid-year brought better news: business confidence was improving and modest growth was portended. The NZIER's Quarterly Survey of Business Opinion showed steady economic activity in the June quarter after the significant disruption following the Canterbury earthquakes last September and -- more severely -- in February.

Business expectations and intentions for September improved, "but we are yet to see the catalyst that transforms this confidence into hiring and investment", said Jean-Pierre de Raad, the NZIER's chief executive. Local demand had strengthened while exports had stabilised, but demand was still the biggest constraint on businesses and margins were tight. Continued deleveraging, slowing activity in Australia and a high exchange rate were obstacles to economic growth.

The National Bank's June survey found business confidence lifted another notch, but other indicators from the survey generally stabilised around May's readings, such as expectations of better times for respondents' own business over the year ahead and investment intentions, although employment intentions slipped slightly. Rural regions were doing nicely, thank you, reflecting the massive terms of trade boost that has been benefiting the economy.

But the National Bank economists were not ready to say their cheering business confidence readings would translate into reality. Time will tell, they said, although they noted the general tenor of New Zealand's leading gauges were at odds with the global scene. Various business confidence measures in the US had been slipping sharply and the momentum was softening in Australia, our largest trading partner.

The lift in sentiment was reinforced by an upwards revision of economists' forecasts. The NZIER's June Consensus Forecasts said forecasters were slightly more optimistic than they had been in March. …

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