Consumer confidence rose from a six-year low in the lead-up to Christmas, as cheaper petrol and low mortgage rates left more in household budgets, the latest Westpac McDermott Miller survey shows.
The consumer confidence index rose 5.6 points to 109.1 in the December quarter, unwinding all of September’s decline, but still below the 111.3 long-run average level. Consumers were more upbeat about both their current situation and their future outlook, with the present conditions index up 4 points at 111.5 and the expected conditions index rising 6.7 points to 107.5. A reading above 100 indicates optimists outnumber pessimists.
Westpac New Zealand senior economist Satish Ranchhod said two major factors supported the bigger spending appetite.
“The first is the fall in petrol prices in recent months, which has put money back into the pockets of many households,” he said. “Mortgage rates have also taken a step down since our last survey, and there’s been a related firming in housing markets in some parts of the country.”
Petrol prices spiked in October as a weaker kiwi dollar and higher global oil prices pushed up the cost of imported fuel. That triggered a sharp response from the government to fast-track new powers for the Commerce Commission to investigate whether the three major fuel companies are rorting consumers. However, since then the kiwi has firmed and international oil prices have eased, giving some relief at the petrol pump.
A net 4.2 percent of the 1,555 people surveyed said they felt financially worse off now than they did a year ago, an improvement on the 5.3 percent feeling the pinch in September. And a net 0.5 percent said they expect to be better off in a year’s time, compared to a net 4.6 percent in the previous survey who thought they’d be worse off.
Ranchhod said the improvement in confidence was widespread across age groups and income brackets. The only group that didn’t register higher confidence was among households earning less than $30,000 a year, although that group was already at above-average levels.
The survey showed a greater willingness among people to make ‘big ticket’ purchases, with a net 27.3 percent of people surveyed saying now was a good time to buy, compared to 20.4 percent in September. The Christmas period is typically the busiest time for retailers, and payments system operator Paymark this week said activity picked up in the second week of December after a sluggish start to the month.
Households were also more upbeat about the wider economy. A net 4 percent predict a better outlook in the coming year, compared to a net 7.9 percent anticipating worse times ahead in September. A net 18.1 percent are optimistic about the five-year horizon, up from 14.9 percent in September.
Consumers have been less pessimistic than businesses since the formation of the Labour-led coalition government, with low-income householders benefiting directly from transfers such as the Families Package and a hike in the minimum wage.
That gloomy outlook among businesses appeared to be turning, with the ANZ Business Outlook yesterday showing fewer pessimists and increased activity. The government has been at pains to get businesses onside, setting up a special group reporting directly to the prime minister, while Finance Minister Grant Robertson has run tight fiscal policy despite having plenty of headroom to boost spending.