Confidence falls to 18-month low

Shoppers plan to spend less this Christmas. Photo / Steven McNicholl

Consumer confidence has weakened to an 18-month low in the Westpac McDermott Miller survey, pointing to modest Christmas spending.

The survey's index has fallen to 108.3 from 114.1 in September and while any number over 100 indicates more optimists than pessimists, it is the lowest level since June last year.

Westpac economist Donna Purdue said the fall in confidence was widespread, with every income group, both sexes and almost every region showing declines.

"That means consumer spending is likely to remain fairly modest over the Christmas period," she said.

A net 36 per cent expect to spend less on Christmas gifts than they did last year. The planned average spend is down, to $522 from $544 last year. Two months after income tax was cut and GST increased, more consumers said they were worse off financially than a year ago - a net 22 per cent, up from 17 per cent in September.

"A net 9.7 per cent of respondents expect bad economic times over the next 12 months, deteriorating from the 3 per cent expecting bad times in September. And, while there is still a healthy level of optimism around the five-year outlook, at a net 48 per cent expecting good economic times over the next five years, that is down from a net 54.5 per cent in September."

The big cities are more optimistic than smaller ones or rural districts - though Wellington more so than Auckland.

Purdue cited a range of factors likely to have undermined consumer sentiment: the early onset of drought in Northland and Waikato, an ongoing slump in the housing market, the increase in GST and rising fuel prices, the aftermath of the Canterbury earthquake and the Pike River disaster.

"But ... as the economy gathers momentum [in 2011] ... we expect growth in consumer spending to match that of income, growing by around 2 to 3 per cent per annum in real terms."

NOT SO MERRY

Westpac McDermott Miller consumer survey shows:

* 22 per cent are worse off compared with a year ago.

* 36 per cent expect to spend less on Christmas gifts than last year.

* 9.7 per cent expect bad economic times over the next year.

* These are net figures, calculated by subtracting the number of pessimists from optimists.