30 Mar 2012

Economist says sustainable recovery needed

7:06 am on 30 March 2012

The construction industry is driving improving business sentiment, but an economist warns that may be unsustainable.

The National Bank's monthly business confidence survey found a net 39% of firms expect their own prospects to improve over the coming year, compared with a net 31% in February.

More respondents plan to hire new staff and invest more.

The bank's chief economist, Cameron Bagrie, says the upbeat mood is a positive sign - but it's important to get the right mix of growth.

"One of the worries out there at the moment is that if we go on a housing-led style recovery... that doesn't have the feel of a sustainable economic recovery," he said.

"For it to be enduring, we need it to be broad, we need it to be export-induced: those are some of the missing ingredients".

Mr Bagrie says inflation expectations for the year have also edged up from 2.68% in February - to 2.76%.