National Bank says 2010 'deleveraging headwind' won't be replaced by 're-leveraging tailwind' in 2011

Read the National Bank's statement below and see the full report here:

The recovery in business confidence has halted. A net 30 percent of businesses expect better times for the economy over the coming year, down 3 points on the month prior.

Business confidence was up in the retailing and manufacturing sectors but down in agriculture, construction and services.

A quick look over the remainder of the survey reveals:

• Firms’ own activity expectations were unchanged. A net 35 percent of firms still expect better times for their own business over the year ahead.

• Profit expectations mirrored the stability in firms’ own activity expectations. A net 15 percent still expect profits to be up over the coming year.

• Employment intentions rose from +12 to +13. Investment intentions increased from +7 to +8.

• Export intentions lifted 3 points. A net 24 percent of businesses expect to increase volumes over the coming 12 months — somewhat shy of its +33 average.

• Residential investment intentions fell sharply. A mere 3 percent expect the outlook to be better over the coming year, down 28 points on November’s reading. Apart from seismic-related activity in Christchurch, prospects across the rest of the country remain anaemic.

• Pricing intentions have lifted 4 points compared to November. But at +22 this is hardly flagging an inflationary undercurrent. This should allow the RBNZ to support returning momentum across the economy via supportive monetary policy and low interest rates for a considerable while yet.

Our composite growth measure continues to flag the potential for 4 percent growth.