Consumer optimism slips on gloomier view of economy

New Zealand consumer confidence dipped in the first three months of the year as Kiwis became gloomier about the economic outlook, even as they remained reasonably happy about the state of their own finances.

The Westpac McDermott Miller consumer confidence index fell one point to 109.6 in the March quarter, tracking below the long-run average of 111.5. A reading above 100 indicates optimists outnumber pessimists. The present conditions index increased 0.2 of a point to 111.7 while the expected conditions index dropped 1.8 points to 108.2.

"The start of 2016 saw a barrage of bad news hitting the headlines. Much of this was related to signs that conditions in the global economy have deteriorated, signalling tougher times ahead for many in the export sector," Westpac Banking Corp economist Satish Ranchod said in his report. "These developments have clearly made households nervous about where the economy is heading."

Weakness in global dairy prices has raised fears about the impact it will have on the wider economy though government data last week showed gross domestic product expanded at a faster pace than expected in the final three months of 2015, underpinned by business services, retail spending and accommodation, and building activity.

A net 1.4% of the 1554 respondents in the Westpac McDermott Miller survey were optimistic about the one-year economic outlook, down from 7.7% in December, while 16.8% were upbeat on a five-year horizon, compared to 18.4% in the previous quarter.

A net 3.2% said their current financial situation was worse than 12 months earlier, unchanged from December.

Still, they were more upbeat about the future, with a net 6.5% expecting to be better off in a year's time, up from 4% three months earlier, and a net 26.7% saw now as a good time to buy major household items, compared with 26.4% three months earlier.

Ranchod said low interest rates were underpinning people's appetite to spend, along with increased economic activity and an improving labour market.

"Households' more upbeat assessment of their personal economic conditions means that even though they're nervous about the outlook in general, it's likely that they will remain in the mood to spend (at least for the time being)," Mr Ranchod said.

The survey showed Aucklanders were more upbeat than their regional counterparts while households were more optimistic about their economy than those on lower incomes.

The survey was conducted between March 1 and March 11.

(BusinessDesk)