NZ consumer confidence declines for fourth month to 3-year low

Thursday 20th August 2015

New Zealand consumer confidence fell for a fourth month to its lowest level in three years as sentiment weakened on the prospects for the year ahead.

The ANZ Roy Morgan consumer confidence index fell to 109.8 in August from 113.9 in July, the lowest level since mid-2012. The futures conditions index fell to a 6 1/2 year low of 104.9 from 110.4, while the current conditions index slid to 117.2 from 119.

A slump in global dairy prices has caused milk processors to cut their forecast payout to dairy farmers to below the cost of production and prompted some economists to revise down their expectations for economic growth in the coming year. The lower price for New Zealand's largest export commodity has led the Reserve Bank to start cutting interest rates and pushed down the value of the local currency.

"There are growing economic challenges," said ANZ Bank New Zealand chief economist Cameron Bagrie. "Consumers are growing more pessimistic about the economy's prospects over the year ahead. Conversely, they still feel better off financially here and now, which is influential for immediate spending trends."

The survey showed a net 7 percent of the 1,005 people surveyed feel better off financially than they did a year ago, up from a net 4 percent last month, while a net 23 percent expect to be better off financially in a year's time, up from 22 percent last month.

Still, their economic outlook deteriorated, with a net 16 percent expecting bad times ahead in the next 12 months, the lowest level in more than three years and compared with a net 2 percent last month. They were less negative about the longer term outlook with a net 8 percent seeing good times over the next five years, down from a net 11 percent last month.

A net 27 percent of respondents said it's a good time to buy a major appliance, down from a net 34 percent last month, which ANZ attributed to the impact of a lower kiwi dollar.

Consumer prices were expected to rise at an annual pace of 3.5 percent over the next two years, down from the 3.7 percent pace forecast last month.

Meanwhile, house prices were expected to rise at a 5.1 percent pace, compared with a 5.2 percent pace last month, and the lowest level in four months. While expectations for Auckland house prices continue to lead the country, the measure fell to 6.6 percent from 7.3 percent last month.

Weaker sentiment was most pronounced in the South Island where sharp falls were seen in Canterbury and the regional South Island, while the weakest sentiment was recorded in the regional North Island, which ANZ said reflected challenges in the dairy sector. Sentiment rebounded in Auckland and Wellington after falling last month.

BusinessDesk.co.nz

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