|Investment Research Group|
I am fortunate enough to live near Ponsonby in Auckland, which contains the most extensive range of bars and restaurants in the country.
Recently I visited a fantastic little bar in Ponsonby Road and while there I talked to a couple of people who work in various venues on the strip. They report a significant change in usage over the past year or so.
Where bars are concerned, during a few months ago they were frantically busy on Thursday, Friday and Saturday nights. Now they are much quieter, with only Friday nights showing any life.
Not far from my house is a particularly fancy restaurant, with high quality food and high prices to match. It is now offering a 7-course meal for $70, which I assume is an attempt to get customers in the door in the face of a downturn in patronage.
Another mid-range restaurant in the same street offers a new menu with no prices for its main courses. Customers get to pay what they think the meal is worth, or what they can afford.
In an associate development, my local tennis club has reported an increase of 50 new members in the past two months alone. Since it and most other clubs have been losing members for years, this is a surprising turnaround.
The only explanation I can think of is that a game of tennis or squash and a drink afterwards (at a considerably cheaper price than in a commercial bar) increasingly is being seen as a good way to pass the time.
Certainly it is more cost effective than flying to Sydney for shopping, Fiji for relaxation or Queenstown for skiing, which were activities regularly indulged in by many of Auckland's wealthier citizens.
These trends suggest that a slowing economy is affecting the purchasing decisions of many people and if sustained will lead to further pain, particularly for small businesses.
The impact, if occurring in other areas, which I suspect is the case, is not yet showing up in official statistics. Latest economic figures only cover the quarter to December 31 and these showed the food, beverage and tobacco industry was the only one of nine measured that grew its output.
Household consumption of non-durables like food was down 0.2%, however. It is apparent that the impact of the recession has yet to be felt on this important area.
Figures for the March quarter are due out end of June. Curiously, food prices increased 0.3% in May 2009 although the biggest rises appear to be in the eat-at-home categories.
Grocery prices rose 1%, thanks to higher prices for bread (up 2.6%) and cakes and biscuits (which rose 2.9%).
Industry sources quoted in March by the NZ Listener report turnover at high-end restaurants has fallen by 20% - 25%, "largely because the corporate lunch market has dwindled".
In essence, while everyone is hopeful that the 'green shoots' of recovery are true indicators of the future, there are still plenty of negatives to be aware of.
I still believe an extended period of 'bobbling along' is the most likely outcome for our economy and the markets.