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Consumer confidence dips as recession endures

By Paul McBeth

Monday 6th October 2008

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New Zealand consumer confidence deteriorated in the past two weeks, in a sign that the impact of recession will linger beyond 2008.

A net 3% of people expect the economy to be in better shape in 12 months time, down from 23% last month and a net 6% in August, according to the One News Colmar Brunton poll. The percentage expecting things to get worse rose to 38% from 27%.

The government is scheduled to open its books today, allowing other political parties to test their policies against the fiscal projections. Prime Minister Helen Clark said today that the Pre-Election Fiscal and Economic Update will show a deteriorating cash position, underlining the impact of the recession.

“We do not anticipate a sustained recovery until late 2009,” said Shamubeel Eaqub, economist at Goldman Sachs JBWere. “There is a downside risk to this view, in particularly from a deteriorating major trading partner economic growth outlook.”

Respondents who thought was getting better fell to 41% in the latest survey, from 50% and those seeing no change fell to 22% from 23%.

Eaqub said the bounce in consumer confidence in early September, when a net 23% of people were upbeat about the economic outlook, was probably a false dawn. Recessions typically have a two-stage impact – a slump in leading indicators, then a decline in activity and job losses.

The poll was conducted from September 27 to October 2, 11 days after government figures confirmed the economy fell into recession in the first half of the year. Weighing on confidence was the impact of the milk scandal at Fonterra’s part-owned San Lu dairy company, while the global banking crisis extended its reach.

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