Consumer confidence picks up, aided by improving dairy outlook, low interest rates

New Zealand consumer confidence rose for a second month after hitting a three-year low in August, helped by an improved outlook for the dairy sector and lower mortgage interest rates.

The ANZ-Roy Morgan consumer confidence index increased four points to a four-month high of 114.9. The current conditions index rose to 115.4 from 114.9, while the future conditions component increased to 114.6 from 108.1.

New Zealanders are feeling less gloomy as dairy prices start to recover from a slump and homeowners benefit from low mortgage rates as regional property values are bolstered by a spillover from the heated Auckland market. Reserve Bank governor Graeme Wheeler said in a speech yesterday that recent economic indicators had been "more encouraging," although further easing in interest rates seems likely.

"Consumer confidence changed key this month and is hitting a slightly higher note," ANZ Bank New Zealand senior economist Philip Borkin said in his report. "A few months back the economy was off key and losing fans. Sentiment had fallen sharply and threatened to keep falling. This rebound is encouraging. Stability in the view on current conditions is important – how consumers are feeling here and now affects spending decisions."

Still, sentiment remains below historical averages and there are still plenty of factors to keep consumers cautious, including rising unemployment, tight dairy incomes and a concerning global backdrop, Mr Borkin said.

The 1019 people surveyed were equally split over whether they felt better or worse off financially than they did a year ago, compared with a net 6% who felt better off last month. A net 25% expect to be better off financially in a year's time, compared with 26% last month.

Their view of the economic outlook improved, with a net 2% expecting good times ahead in the next 12 months, up from 12% expecting bad times last month. They were also more upbeat about the longer-term outlook with a net 18% seeing good times over the next five years, up from a net 11% last month.

Confidence improved in all regions with the biggest gains in Canterbury and the regional North and South islands, which ANZ attributed to an improved dairy outlook. Canterbury recorded the highest confidence reading, followed by Auckland, with Wellington the least optimistic.

A net 31% of respondents said it's a good time to buy a major appliance, up from a net 24% last month.

Consumer prices were expected to rise at an annual pace of 3.3% over the next two years, down from the 3.6% pace forecast last month.

Meanwhile, house prices were expected to rise at a 4.8% pace, compared with a 5.2% pace last month, and the lowest level since February.

"Reduced expectations were evident across all regions, even the regional North Island, despite anecdotes of Auckland pressures permeating to nearby regions," Mr Borkin said. "The exception is Wellington, where house price expectations rose to 6%, the strongest across the country."

(BusinessDesk)