NZ consumer confidence rises in January, belying global turmoil

Thursday 21st January 2016

New Zealand consumer confidence gained in January, with its stability notable considering the turbulent state of the global economy, according to the latest ANZ-Roy Morgan Consumer Confidence Index.

After dipping 4 points last month, the index rose 3 points to 121.4 in January, in line with the historical average of 119. Current expectations rose 4 points, while future expectations rose 2 points, with the former a positive sign for spending trends, ANZ's chief economist Cameron Bagrie said.

“The New Year has started horribly for global financial markets, with commodity prices and equities being thumped - but so far it hasn’t affected local sentiment," Bagrie said. "It’s obviously a serious risk for our economy if the turmoil continues, but developments aren’t all bad news for consumers – lower oil prices will feed through into retail petrol prices in time, leaving more money in pockets, and lower interest rates are freeing up cash too."

Expectations for the economy over the year ahead were unchanged at +6, in line with its historical average, while expectations further out to five years ahead were also unchanged at +17, which is slightly below the historical average.

A net 8 percent of respondents feel financially better off than a year ago, up 2 points, while expectations 12 months ahead rose to net 32 percent from 26 percent last month.

More consumers thought it was a good time to buy a major household item, with the reading improving to a net 44 percent from December's 38 percent. Inflation expectations fell slightly to 3 percent, down from 3.1 percent in December.

"The benefit of lower interest rates is still flowing into the economy," Bagrie said. "Regional house prices are lifting sharply. The economy clearly regained momentum in late 2015, such that job creation has picked up strongly. Competitive pressures continue to swat away the inflationary impact of a lower New Zealand dollar, keeping tradable prices low; that’s good for bargain hunting."

Canterbury was the most confident region, followed by Auckland. House price expectations in New Zealand's largest city moderated from a 6.5 percent predicted increase to a 4 percent prediction.

Bagrie said there were "respectable prospects" for the New Zealand economy heading into 2016, and New Zealand has the forward momentum needed to deal with turbulence, though he warned that confidence should not turn into complacency.

"As a commodity exporting nation, weak global commodity prices and slowing demand do not spell great prospects for our national earning potential. And as a debtor nation, an escalation in global credit market pressures could affect domestic funding costs. We are watching these developments closely. But as we sit here today, they are risks rather than a foregone conclusion," he said.

BusinessDesk.co.nz

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