Improved economy boosting consumers' finances

New Zealand consumers are less financially stressed and their demand for credit is increasing, a new economic survey has found.

Dun & Bradstreet’s Consumer Financial Stress Index has fallen steadily to 4.1 points in April after peaking at 14.1 in December last year, when unemployment was at a 13-year high of 7.3%. It has since fallen to 6.1%.

D&B says the falling index reflects official statistics indicating a solid economic performance through the first quarter of 2013 and further positive news since, including increased trade growth with China.

A pick-up in the housing market over the past few months, solid business activity and low interest rates have had a positive flow-on effect to consumer confidence.

“This year we are clearly seeing consumers benefit from a steady improvement in economic conditions,” D&B New Zealand general manager Lance Crooks says.

“The Consumer Financial Stress Index reflects this recent change in conditions and also matches what we’re finding in our other research. Kiwis are reporting that they are more comfortably meeting their financial obligations – like credit cards, loans and electricity bills – and that they expect to reduce their future levels of debt.

“As a result, financial stress is easing and consumers are regaining their appetite for new credit, although we expect that a cautious approach to spending is likely to continue for some time.”

According to Stephen Koukoulas, D&B’s economic adviser, changes in the level of the index are closely correlated with growth in employment, house prices and, to a lesser extent, retail trade.

"In late 2012 we saw a steady rise in the index and rising unemployment levels which risked off-setting the positive signs of coming out of the New Zealand economy,” he says.

"The recent fall in consumer financial stress, however, is a welcome sign and it is likely to continue to benefit from the steady, low level of interest rates, falling unemployment and strong house prices.”

D&B’s most recent Consumer Credit Expectations Survey found New Zealanders are cautiously optimistic about their personal finances, opting to raise their credit limits over the coming months.

Also, 60% of people expect to find it easy to pay their credit bills in the coming months and 25%r expect to reduce their debt levels.

nkloeten@nbr.co.nz