Consumer confidence falters but still positive

By Phil Boeyen, ShareChat Business News Editor

Wednesday 27th June 2001

There's been a small drop in consumer confidence as New Zealanders digest the effects of a deteriorating global economy.

The WestpacTrust McDermott Miller Consumer Confidence Index for the June quarter shows confidence has eased back to 117 from its recent high of 121.6 in March.

An index number over 100 indicates that there are more optimists than pessimists, while a number under 100 indicates that pessimists outnumber optimists.

WestpacTrust chief economist, Adrian Orr, says despite the small drop in confidence this quarter, the positive level remains consistent with modest consumer spending and GDP growth in the year ahead.

"Consumer confidence has held up well in the face of global economic uncertainty. Moreover, this confidence is increasingly being translated into spending, with the domestic economy on the way to picking up the slack from weaker export growth."

The only region to report a rise in confidence in the quarter was the Nelson/Marlborough/West Coast, which Mr Orr says most likely reflects the end of the drought in that region.

Confidence in the Auckland region has held up and it is now the third most confident region in the country, while rural areas are the least optimistic this quarter, particularly the Bay of Plenty, Taranaki and Manawatu.

In terms of the economic outlook, only a net 15% of respondents now expect good economic times over the year ahead, compared to 26% in March.

"Consumers appear aware of the deterioration in the global economy and the implications for New Zealand, with fewer expecting better export prospects over the year ahead," says Mr Orr.

"Most survey respondents remain optimistic about their own financial situation, albeit less so than last quarter. Better job prospects, higher wages, and greater profitability remain the key influences on optimism."

There's some good news for retailers, with consumers continuing to perceive now as a good time to buy major household items.

Mr Orr says, in an environment of slowing export growth, unsettled business confidence, and debt-constrained households, the economy seems in little danger of overheating and generating inflationary pressures, suggesting that a further interest rate cut from the Reserve Bank is sensible.

A decision by the US central bank, the Federal Reserve, on whether to cut interest rates further is due later today.

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