Surveys’ bad news takes a turn for the better

“It’s getting better all the time,” the optimist Paul McCartney sings.

“It can’t get no worse,” the cynic John Lennon reminds us.

And so it is with the rebound in business and consumer confidence that’s been picked up by the ANZ’s latest monthly research.

Headline consumer and business confidence bounced in October and that’s good news for the Government. It’s not quite great news yet. Once you dig below the headline numbers, neither ANZ’s Business Outlook Survey nor its sister survey (Roy Morgan Consumer Confidence) are cheery by historic standards.

But there are signs we may finally be moving through the malaise of poor sentiment that has overshadowed otherwise strong economic numbers for the past two years.

The consumer confidence data showed three key areas had reversed all of September’s slide.

Consumers’ perceptions of their situation were the best they have been since 2007, with a net 20 per cent feeling financially better off than a year ago.

Confidence rose in every region, but most sharply in the North Island outside of Auckland and Wellington.

Evidence of a business confidence rebound is less solid. Top-line sentiment about the general economic situation did improve, but the respondents’ outlook for their own firms’ activity continued to slide.

Still, the rate of decline slowed, suggesting the gloomy sentiment may be finding a floor.

Publicly at least, it’s unlikely we’ll see much Government crowing about the more upbeat tone of the surveys.

It has attacked their credibility and significance as the numbers have worsened.

Perhaps it’s all a bit like the polls, which politicians never find credible until they turn in their favour.

But behind the scenes, the Government will be pleased to see this bump and stabilisation.

There are signs we may finally be moving through the malaise of poor sentiment that has overshadowed otherwise strong economic numbers for the past two years

It appears to have listened to some business concerns. It doesn’t seem coincidental that there have been a series of relatively business friendly policy announcements in the past few months.

On the consumer front, it is likely that lower mortgage rates are finally starting to flow through to home owners on fixed terms.

Wage growth is also continuing to improve — aided by minimum wage legislation and state sector pay rises.

And unemployment has remained low.

There are also signs of a pick-up in the housing market — both in the hard data and in the outlook.

The consumer confidence survey even had house price inflation expectations lifting the beleaguered Auckland market (expected to rise by 2.5 per cent, up 0.5 per cent).

A housing market resurgence is not the economic driver anyone wants to see, but it remains a powerful influence on how wealthy homeowning consumers feel.

For business and consumers, big scary headlines about the precarious state of the global economy remain hard to ignore. The global growth trend is not good.

But prices for our dairy and meat exports have been strong and look to underpin the regional economy next year.

Sentiment is a funny thing. It’s fickle and can be illogical.

There are no guarantees that it will continue to improve. But perhaps there is hope, for those worried we were talking out way into a downturn, that we’ve decided not to.