Consumer confidence points to big-spending Christmas

The number of households who think now is a good time to make a major purchase has risen to its highest level in four years. Photo / Stephen Parker

Two big confidence surveys this week suggest the local economy ended the year on a positive note despite recent global market turmoil.

Consumer confidence bounced back in the December quarter, completely reversing a sharp drop in the September quarter, according to the latest Westpac McDermott Miller survey.

The turnaround in consumer sentiment follows the lift in business confidence picked up in the ANZ Business Outlook survey released on Tuesday.

"The number of households who think now is a good time to make a major purchase has risen to its highest level in four years," said Westpac Senior Economist Satish Ranchhod.

"We're also seeing a growing number of households increasing their spending on entertainment and dining out."

Through the middle part of this year, there had been a notable loss of optimism in the New Zealand economy, he said.

Two big factors were helping to boost spending appetites, Ranchhod said.

The first was the fall in petrol prices since the start of October, which had put money back into the pockets of many households.

Mortgage rates had also taken a step down since the last survey, and there had been a related firming in housing markets in some parts of the country, he said.

"The recent increase in confidence has been widespread. There have been particularly large gains in Auckland and in the Gisborne/Hawke's Bay region."

Consumer confidence in New Zealand strengthened in the December 2018 quarter (up 5.6 index points from 103.5 in the September quarter) to 109.1 on the Westpac McDermott Miller Consumer Confidence Index.

All categories of consumers (with the sole exception of Waikato) were now optimistic about the outlook.

"This quarter last year, consumer confidence in New Zealand fell sharply, with Auckland metropolitan consumers, in particular, uncertain about the medium-term outlook for personal and household incomes following the 2017 election," said McDermott Miller managing director Richard Miller.

"Auckland metropolitan consumers seem more comfortable with the political environment for both Auckland and New Zealand," he said.

"Rising consumer optimism suggests spending will be stronger this Christmas than last year, particularly in the metropolitan centres"

The survey was conducted over December 1 to 11, with a sample size of 1,555. An index number over 100 indicates that optimists outnumber pessimists. The margin of error of the survey is 2.5 per cent.

On Tuesday ANZ Business Outlook, which has been notable for registering historically low levels of business confidence since the 2017 election, showed business expectations for their own outlook on the mend.

A net 24.1 per cent of firms surveyed in the survey expected general business conditions to deteriorate in the coming 12 months, versus 37.1 per cent in November.

But business views of their own activity, which is more strongly correlated with actual economic performance, rose six points to a net 13.6 per cent predicting increased activity, versus just 7.6 per cent in November.