Consumer confidence spiked to four year high in 3Q

New Zealand: consumer confidence spiked to four year high in 3Q

• Consumer confidence jumped 14 points in 3Q
• Confidence spiked to four-year high
• Optimists outweighed pessimists for second straight quarter

The Westpac McDermott-Miller consumer confidence index jumped to a four-year high of 120.3 in 3Q from 106.0 in 2Q. The headline is a sharp contrast to the 81.7 level touched just over a year ago when official interest rates were at record highs. Now, though, confidence is being underpinned by record low interest rates, combined with improved economic conditions offshore, and the end of New Zealand’s prolonged recession.

We expect that optimists in New Zealand will continue to outweigh pessimists in the foreseeable future, particularly given recent signs of life in the domestic housing market. Median house prices rose 2%m/m in August, sales jumped 39%oya, and days to sell fell to 34, well below the peak of 62 days recorded in February. Though rising unemployment and softer wage growth will cap the upside, the improvement in confidence points to stronger retail sales in coming months (chart). We, therefore, suspect that household consumption will make another positive contribution to economic growth in the September quarter.

Consumer Confidence Doc With Graphs (pdf)

ENDS

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