Buoyant mood shrugs off creeping doubts and rain

By BRIAN FALLOW economics editor

Consumer confidence remains high, according to the latest Westpac McDermott Miller survey.

The overall confidence index eased to 124 from 126 in December. Any number over 100 represents more optimists than pessimists.

Confidence remains at levels last seen in the mid-1990s boom.

Of the five questions reflected in the index, the biggest change was in whether people expect good or bad times in the economy over the next 12 months. A net 14.7 per cent are still optimistic, but that is down from 24.1 per cent three months ago.

The medium-term outlook is bullish, with a net 32.4 per cent expecting better times in five years, up from 25.2 per cent in December.

But the proportion of respondents who say they are better off than they were a year ago has dropped to a net 5.3 per cent from 12.1 per cent last time.

The proportion who say it is a good time to buy a major appliance is unchanged at a high level historically.

The decline in confidence was restricted to 30- to 49-year-olds, and more pronounced among men and in the upper socio-economic group.

Sentiment in Auckland deteriorated 5.1 index points, steeper than the national fall. But Auckland remains more confident than the country as a whole, though less so than Wellington.

Not surprisingly in light of last month's floods, confidence in the Taranaki-Manawatu-Wanganui region fell, to be the lowest in the country.

However, Canterbury's decline was steeper.

Westpac chief economist Brendan O'Donovan said some undercurrents of doubt were starting to creep into consumer confidence.

"Consumers' outlook is consistent with our own view of the economy," he said.

"That is, momentum is fine in the here and now, but the housing market is past its peak, the wider economy is likely to follow and exporters will not provide the economic boost in time to counter the domestic downturn."

O'Donovan added that the damp summer would not have helped people's mood either.