Consumer confidence at 9-yr high

JAMES WEIR
Last updated 10:33 17/03/2014

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Consumer confidence is at its highest level in nine years, as the economy hits a "sweet spot" a new survey shows.

But while the country is experiencing a building boom and high export prices, households are not expected to go on a spending spree.

The Westpac McDermott Miller Consumer Confidence Index rose to 121.7 in March, up from 120.1 in the December survey. The index was the highest since March 2005, when it was 126.7.

An index number over 100 shows optimists outnumber pessimists.

"Economic optimism among New Zealand consumers has risen to levels last seen at brief points during the mid-1990s and mid-2000s," Westpac chief economist Dominick Stephens said today.

In the mid-1990s the economy was booming, bouncing back from the sharp downturn in 1991, and in 2004 the economy was again growing strongly.

"Clearly there is now a consensus out there that the combination of a construction boom and export prices at multi-decade highs is a sweet spot for the New Zealand economy."

Consumers' feelings about their own finances and their attitudes to spending had picked up over the past six months, but not to the same degree, Stephens said.

"For now that suggests that growth in consumer spending will stay relatively moderate," he said.

"Consumers are sharing in the economic upturn, but unlike in the 2000s they're not driving it this time around."

The net percentage of households reporting an improvement in their financial situations rose modestly, to a still-cautious 2.7 per cent, but net percentage expecting their financial situation to improve over the next year fell to 10.6 per cent, slightly below the historical average.

There were increases in the net percentage of households saying that now is a good time to buy a big household item to 28.3 per cent, a little above average.

The net percentage saying they increased their spending on entertainment and eating out over the past year improved to -11.5 per cent, the highest since December 2007.

The survey was conducted in the first 10 days of March, just before the Reserve Bank put up interest rates late last week.

The survey had a sample size of 1594 and a margin of error of 2.5 per cent.

The biggest increase was in the net percentage of households expecting good times for the economy over the year ahead, to 35 per cent.

Near-term economic optimism has only been higher at two other times in the history of the series - in June 1994 (38.6 per cent) and in December 2004 (36.4 per cent).

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- Fairfax Media

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