Rural areas lead increase in consumer confidence

Goldman Sachs economist Philip Borkin. Photo / Supplied

Consumer confidence has jumped in this month's ANZ-Roy Morgan poll.

The index rose 9 points to 112.5, the highest levels since last August and close to the historical average. Any level above 100 represents more optimists than pessimists.

Rural areas recorded the highest confidence readings, with Canterbury lagging behind.

"In explaining the reasons behind the improvement in sentiment, we can't go past the improving labour market and record high dairy payout for the 2010-11 season, as well as indications of historically high rural incomes for the following season as well," said ANZ's head of market economics, Khoon Goh.

Goldman Sachs economist Philip Borkin said that, like yesterday's retail sales data for the March quarter, the improvement in consumer confidence was consistent with an improving backdrop for consumer spending - at least relative to the poor end to 2010.

But he said that last year, despite improving surveyed consumer sentiment, spending had remained subdued as households continued to focus on repairing their balance sheets.

The ANZ survey also asked respondents for their view of inflation two years out. It has fallen from 4.1 per cent in April and 3.6 per cent in May to 3.2 per cent in the latest survey.

"This is likely to reflect recent falls in petrol prices," Goh said.

"The Reserve Bank will welcome the decline."