NZ consumer confidence ticks back up in March quarter as political jitters fade
By Rebecca Howard
March 20 (BusinessDesk) - New Zealand consumer confidence retraced its post-election drop to return to average levels in the March quarter as political jitters faded and the economy remains strong.
The Westpac McDermott Miller consumer confidence index rose 3.8 points to 111.2 in the March quarter, just below the long run average of 111.4. A reading above 100 indicates optimists outnumber pessimists, and the survey has been above that level since March 2011. The present conditions index rose 3.5 points to 111.2 while the expected conditions index rose 4.0 points, also to 111.2.
"It’s not unusual to see a bit of nervousness around major events like elections, or for the related wobbles in confidence to fade after a few months," said Westpac Banking Corp senior economist Satish Ranchhod.
However, "political developments aren’t the only thing affecting confidence right now. The past few months have also seen mortgage rates pushing down and a related second wind in the housing market. We’ve also continued to see positive conditions in some key sectors of the economy, like the hospitality sector," he said.
Ranchhod noted that households are feeling more optimistic about the outlook for their own financial situation over the coming year and "they have also become more upbeat about the economy’s longer-term trajectory more generally."
A net 11.7 percent of the 1,552 people surveyed between March 1 and March 15 expect the economy to improve over the coming year, up from 4.9 percent in the previous quarter, while a net 17.9 percent see better times for the economy over a five-year period versus 14.3 percent in September.
The number of households who think now is a good time to purchase a major household item rose 9.1 points to 22.5 percent, versus 13.4 percent in the prior quarter but still below the long-run average of 26.1 percent.
Given a drop in mortgage rates, a resurgence in the housing market and still strong population growth, "we expect that cash registers will continue ringing over the coming months," he said.
Ranchhod warned, however, as spending appetites have increased, so too has households’ willingness to take on debt. Each quarter the survey asks households what they would do if they received a windfall of $10,000 and the number who said that they would use this to pay down debt has now fallen to the lowest level since the survey began in 1998, he said.
According to Ranchhod, relative to disposable incomes, debt levels are now at record highs, with much of this leveraged against housing assets.