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Consumer confidence rises, outperforms business confidence

NZ consumer confidence rises in February, outperforms business confidence

By Sophie Boot

March 2 (BusinessDesk) - New Zealand consumer confidence gained in February, continuing a recovery and bolstering the composite gauge after weak business confidence results.

The ANZ Roy Morgan consumer confidence index rose to 127.7 in February from 126.9 in January. The current conditions index fell 4 points to 127.3 while the future conditions index gained 4 points to 128.

Of the survey's 1,000 respondents, a net 21 percent saw good economic times in the coming 12 months, unchanged from January. The five-year outlook rose seven points, with a net 29 percent seeing good times ahead. A net 15 percent of respondents felt they and their families were better off financially than this time last year, from net 16 percent in January, and a net 34 percent expect to be better off financially a year from now, up from 29 percent.

“Consumer confidence is at robust levels. We suspect one has to look no further than the tight labour market to explain why," said Sharon Zollner, chief economist at ANZ Bank New Zealand. "The outlook for household incomes is good, with both the record-high terms of trade and slightly higher wage growth set to support. With the housing market seemingly having found a floor, downside risks have receded. The gap that opened up last month between responses to the current-situation and forward-looking questions closed in February."

A net 40 percent said it was a good time to buy a major household item, down from 47 percent in January. Respondents expected house prices to rise 3.1 percent per year over the next two years, up from 2.9 percent the previous month, and thought prices in general would rise 3.3 percent per year over the next two years, from 3.2 percent in January.

"While we are predicting more modest activity growth as capacity constraints bite, we believe this economic cycle has legs yet," Zollner said. "Strong commodity prices are boosting exporter incomes, and the strong labour market and government policy are supporting household incomes. With household debt at a record high as a proportion of those incomes, it’s perhaps just as well."

This survey comes after Wednesday's release of the first ANZ Business Outlook of 2018, which showed local firms are still feeling negative, despite all five sectors lifting in February and overall confidence improving. The survey reported a net 19 percent of businesses were pessimistic about the year ahead, versus 38 percent in December.

Zollner said ANZ's confidence composite gauge, which combines business and consumer sentiment, has "taken a hit from the fall in business confidence, but robust consumer confidence is supporting it", and is consistent with GDP growth between 2 percent and 3 percent.


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