NZ consumer confidence rises to 19-month high, indicating robust economy

Friday 18th November 2016

New Zealand consumer confidence rose to its highest level in 19 months in November as rising employment, low inflation and a recovery in the dairy sector point to robust economic growth.

The ANZ-Roy Morgan consumer confidence index climbed 4.3 points to 127.2 this month, the highest level since April 2015, and when combined with elevated business sentiment pointed to gross domestic product growing at an annual rate of more than 4 percent. The current conditions index gained 4.6 points to 127.3 while the future conditions index was up 4.1 points to 127.2.

New Zealand's economy has been bolstered by an expanding population filling a growing number of jobs and keeping a lid on wages in an environment of low inflation. While rising house prices have made property less affordable for first-home buyers and poor households, the rising wealth effect is thought to have bolstered consumer spending already being fuelled by a rising migration and record tourism.

ANZ Bank New Zealand chief economist said GDP growth of more than 4 percent probably isn't attainable, but "is a strong directional signal nonetheless" and reflected a strong economy.

"The labour market is strengthening, cost of living changes remain historically low (every dollar earned goes further), dairying is no longer facing the risks it was, an earlier house price gains have given home owners a decent wealth boost," Bagrie said. "While there are certainly pressure points (Auckland housing, household debt levels), the economy doesn't have the same widespread vulnerabilities and imbalances that have often tipped it over in the past when negative shocks have hit."

The majority of the survey's 1,002 respondents were received before this week's earthquakes, and Bagrie said there was likely to be a hit to confidence as a result, which will be a key factor in the near-term economic impact.

Of those respondents, a net 13 percent said they were better off financially than a year earlier, up from 11 percent in October, while 31 percent expect to be better in a year's time, compared to 30 percent.

On the broader economy, a net 23 percent expect good times in the coming year, up from 21 percent in October, and 28 percent are more upbeat about the coming five years, compared to 18 percent a month ago.

Consumers were upbeat about buying big-ticket items, with a net 42 percent saying it was a good time to purchase major items, up from 35 percent in October.

Two-year ahead annual inflation expectations rose to 3.3 percent from 3.1 percent in October, while annual house price inflation was seen slowing to 5 percent from 5.7 percent.

BusinessDesk.co.nz

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