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Consumer confidence slips, short-term pain anticipated

Monday 22nd December 2008

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New Zealand consumer confidence slipped this quarter, amid expectations that the short-term economic outlook has worsened amid a global slump.

Consumer confidence fell to 101.3 in the December quarter from 104.8 three months earlier, according to the Westpac McDermott Miller Consumer Confidence Index. A number above 100 indicates optimists outnumber pessimists. Confidence has revived from 81.7 in the June quarter.

"In the eyes of the consumer, not even lower fuel prices, the sharp fall in interest rates, or the new government can rescue the New Zealand economy from the wrath of the global downturn," said Donna Purdue, Westpac senior economist.

Government figures tomorrow are expected to show the economy shrank 0.5% in the third quarter extending the nation's first recession since 1998. Khoon Goh, senior markets economist at ANZ National Bank, predicts the slump will extend into next year, with a contraction of 1% over the 2009 calendar year.

A net 45% of consumers surveyed expect economic conditions to worsen over the next 12 months, a deterioration from the net 17% seeing poorer times ahead in September. The gloomy short-term outlook shows "clearly, the bad news from offshore is getting through to consumers," Purdue said.

The decline in confidence in the latest period was felt most intently in dairy farming regions, such as Canterbury and Waikato, suggesting the prospect of reduced payments for milk will erode farm incomes in the next 12 months.

Long-term, consumers are upbeat about the economy, with a net 51.6% expecting the economy to be in better shape in five years, according to the survey.

By Jonathan Underhill

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