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Consumers banking on better times ahead

Thursday 22nd April 2010

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The gap between how New Zealand consumers feel now and what they expect in the future remains wide, with better times still seen ahead.

Confidence edged up 0.1 points to 121.9 this month, according to the ANZ Roy Morgan Consumer Confidence survey, a “broadly healthy” level, though a “material gap” remains between their outlook on the present environment compared to what the future holds.

The future conditions index rose 2 points to 135.1, while current conditions slipped 2.6 points to 102.3.  

“The gap between future and current conditions is not surprising. However, the continuity of it is,” said ANZ economist Khoon Goh and Roy Morgan’s Mark Dansey in their report.

“It is the persistence of this gap that continues to point to fundamental differences in the current recovery process relative to previous cycles (where historically strong recoveries have followed deep downturns).” 

New Zealand’s economy climbed out of its worst recession in 18 years in the middle of last year, and surging dairy prices have underpinned its performance since then.

Investors are waiting for the Reserve Bank to begin removing some of its stimulus, and Governor Alan Bollard is expected to begin hiking the official cash rate from a record low 2.5% in June or July.

Markets are betting the central bank will hike the OCR by 161 basis points in the coming year, according to the Overnight Index Swap curve.  

The survey of 1,015 people found a net 11% said they were worse off than the same time last year, no change from March, while a net 38% of respondents expect to be better off this time next year, compared to a net 33% a month ago.  

A net 23% of respondents predict New Zealand’s economy will be in better shape in the next 12 months, compared to a net 20% in March, and a net 45% pick the next five years will be good, compared to 46% last month.  

A net 16% of respondents think now is a good time to buy major household items, compared to a net 20% in March.

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