Photo: Yiting Lin / RNZ
A new business survey gives a clear signal the economy has turned a corner, but a market analyst warns it will not necessarily be smooth sailing.
Forsyth Barr's surveyed businesses about the past three months and found firms are much more optimistic given falling interest rates and increased demand.
More than half think the economy is headed in the right direction, while around half are budgeting for a better year ahead and have seen an uptick in sales.
Senior analyst Aaron Ibbotson said some business confidence surveys earlier in the year pointed to an improvement but that did not happen.
"We're cautious but I have to say it is very broad-based, it's coming off the back of interest rate cuts and this is a large survey of over 700 respondents. To me this looks like a pretty clear signal we are through the worst, but we've said it before, and it hasn't turned out to be the case."
The biggest surprise of the survey was that retailers are much more upbeat than expected given a weak earnings season in September.
Retail businesses reported demand was up 19 percent in November compared to negative 29 percent in April.
"The latest earning season was quite weak for retail overall. The sense you get looking at mortgage rates is that the consumer is under pressure still even if sentiment is improving.
"That was the biggest surprise relative to our expectations, that people that own retail businesses or are senior business people in the retail space have become so much more positive versus six or eight months ago."
Ibbotson said that is a result of interest rates falling, excitement about the summer season and potentially that smaller retailers surveyed have done better than big firms.
Construction on the other hand is still in the doldrums, he said.
"Construction, freight and also manufacturing stand out as three areas where it is still not looking good. If you take construction for instance, they were very negative eight months ago. They're still negative but slightly less so. It's important to keep in mind you're talking about a deterioration from an already very poor level of activity."
All sectors including property, freight and argiculture responded to the Forsyth Barr survey.
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