Consumer confidence in New Zealand tumbled in the fourth quarter to the lowest level since the depths of recession in 2009 in the face of increasingly gloomy new from Europe and the fading effects of the Rugby World Cup.
The Westpac McDermott Miller Consumer Confidence Index fell 11 points to 101 in the final three months of 2011, nearing the 100 level that separates pessimists from optimists being in the majority.
The present conditions index sank 9.4 points to 96.2 and the future conditions index dropped 11.5 points to 104.7, rounding out a quarter that points to a gloomy Christmas for retailers. That's evident from the lack of interest households now show in buying major household items, with a net 13 percent of respondents saying it is a bad time to buy big-ticket items.
"Such a pronounced drop in confidence signals a retrenchment in consumer spending in the months ahead, especially as consumption is already likely to take a post-Rugby World Cup breather," said Westpac chief economist Dominick Stephens.
The survey provides more evidence that the domestic economy is tepid enough to ensure the Reserve Bank keeps interest rates low "for a while yet," Stephens said.
The survey shows the biggest erosion in confidence comes from middle-income kiwis, where confidence is now below 90, from 107 three months earlier. That's the most pessimistic middle New Zealand has been since June 2008 and before that the early 1990s recessions, Westpac said.
An index of consumer stocks on the NZX, which includes the nation's major listed retailers, has dropped 16 percent this year and is now near its lowest since mid-2009.
Last month Warehouse Group, the biggest retailer on the NZX 50 Index, forecast an 8 percent decline in full-year 'adjusted' profit. Chairman Graham Evans said the extent of any underlying growth in non-food sales remains uncertain.
Today's survey showed 22 per cent of respondents expect bad economic times in the year ahead, up from just 2 percent in June. That's the worst since March, when consumers had been rocked by the February 22 earthquake that devastated Christchurch and 47 percent were gloomy about the near-term economic outlook.
Earlier this month Reserve Bank Governor Alan Bollard kept the official cash rate at a record low 2.5 percent, citing the "unusual degree of uncertainty around global conditions and the moderate pace of domestic demand."
Traders are betting he may lower interest rates by 10 basis points over the coming 12months, based on the Overnight Index Swap curve.