New Zealand consumer confidence rose to its highest level in 19 months in November as rising employment, low inflation and a recovery in the dairy sector point to robust economic growth.
The ANZ-Roy Morgan consumer confidence index climbed 4.3 points to 127.2 this month, the highest level since April 2015, and when combined with elevated business sentiment pointed to gross domestic product growing at an annual rate of more than 4 per cent. The current conditions index gained 4.6 points to 127.3 while the future conditions index was up 4.1 points to 127.2.
New Zealand's economy has been bolstered by an expanding population filling a growing number of jobs and keeping a lid on wages in an environment of low inflation. While rising house prices have made property less affordable for first-home buyers and poor households, the rising wealth effect is thought to have bolstered consumer spending already being fuelled by a rising migration and record tourism.
ANZ Bank New Zealand chief economist said GDP growth of more than 4 per cent probably isn't attainable, but "is a strong directional signal nonetheless" and reflected a strong economy.
"The labour market is strengthening, cost of living changes remain historically low (every dollar earned goes further), dairying is no longer facing the risks it was, an earlier house price gains have given home owners a decent wealth boost," Bagrie said. "While there are certainly pressure points (Auckland housing, household debt levels), the economy doesn't have the same widespread vulnerabilities and imbalances that have often tipped it over in the past when negative shocks have hit."
The majority of the survey's 1,002 respondents were received before this week's earthquakes, and Bagrie said there was likely to be a hit to confidence as a result, which will be a key factor in the near-term economic impact.
Of those respondents, a net 13 per cent said they were better off financially than a year earlier, up from 11 per cent in October, while 31 per cent expect to be better in a year's time, compared to 30 per cent.
On the broader economy, a net 23 per cent expect good times in the coming year, up from 21 per cent in October, and 28 per cent are more upbeat about the coming five years, compared to 18 per cent a month ago.
Consumers were upbeat about buying big-ticket items, with a net 42 per cent saying it was a good time to purchase major items, up from 35 per cent in October.
Two-year ahead annual inflation expectations rose to 3.3 per cent from 3.1 per cent in October, while annual house price inflation was seen slowing to 5 per cent from 5.7 per cent.