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WestpacTrust Consumer Confidence Survey - Q2 2001

NZ: WestpacTrust Consumer Confidence Survey - Q2 2001

Key Points

The WestpacTrust McDermott Miller index of consumer confidence fell to 117.0 in Q2 2001, from 121.6 in Q1. A reading greater than 100 indicates that the number of optimists exceeds the number of pessimists.

The fall was broadly in line with that suggested by the more timely monthly Colmar-Brunton survey (see chart below). We had expected the WestpacTrust index to fall to around 115.

A net 26% of respondents now think it is a good time to buy a major household appliance, up from a net 23% in the previous survey. A competitive trading environment and good sales were cited as the key factors underpinning solid spending intentions.

A net 18% of respondents expect to be better off financially in a year's time - down slightly from the +23% reading in Q1. Improved job prospects, higher wages and greater profitability remain the key drivers of optimism.

A net 15% of respondents expect good economic times over the next 12 months - down from the +26% reading in Q1. Respondents cited the impact of the weakening global economy on export prospects as the key reason for reduced levels of optimism. Household expectations of inflation fell to 3.9% in Q2 2001, from 4.2% in Q1. Households' expectations of inflation have tended to remain at around 4% over the past 10 years, irrespective of actual inflation outcomes.

Commentary

The Q2 WestpacTrust index printed broadly in line that suggested by the monthly Colmar-Brunton survey. Therefore, today's outcome provided no new information. While consumer confidence has eased since the highs recorded in March (when the Q1 survey was taken), we doubt that the WestpacTrust result is indicative of an emerging trend. Indeed, the June installment of the Colmar-Brunton survey pointed to a solid rise in confidence, following a reasonably sharp decline during April and May.

With consumer confidence remaining at robust levels, we anticipate a continuation of steady growth in retail activity over the period ahead (that said, we think that retail sales in May will print close to flat following three consecutive months of strong growth). Rising wage settlements and buoyant farm incomes will provide further encouragement to the household sector, as will the recent improvement in sentiment regarding the housing market.

Today's result supports our view, and that of the market, that the RBNZ will leave its OCR unchanged at 5.75% when it next reviews policy settings on 4 July.

Darren Gibbs, Senior Economist, New Zealand


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