Consumer outlook lowest since 1991

By Brian Fallow

Consumer confidence is at its weakest level since 1991, adding to evidence that the economy is in recession.

The Westpac McDermott Miller consumer confidence index fell 15 points from its level in March to 82, the third-lowest reading in the 20-year history of the survey.

"Consumers are squealing due to the high cost of living," Westpac chief economist Brendan O'Donovan said.

High food and petrol prices were the biggest concerns, though the "litany of woe" also included rising debt servicing costs, falling house prices and job losses.

"It's consistent with what we are hearing from businesses," he said. "It's pretty dire out there. Auckland retailers particularly are struggling."

Consumer sentiment tended to reflect the state of the economy at the time, Mr O'Donovan said.

"Right now we are sitting in a recession. We expect Friday's [March gross domestic product] numbers to be negative, but the June quarter's [not due until September] will be the worst of the lot."

But while world oil prices had risen by more than a third since the March quarter and a weaker dollar had put upward pressure on prices for food and imported goods, the economic news had not been all bad.

A tax-cutting Budget, a record Fonterra payout and the Reserve Bank signalling lower interest rates to come should provide relief to cash-strapped households later this year.

But McDermott Miller managing director Richard Miller said the survey found consumers pessimistic in every region and socio-economic group, regardless of age or gender.

"The last time this occurred was in the early 1990s when there was widespread unemployment and closures of industries arising from economic restructuring."

But Mr O'Donovan said that while consumer sentiment might be as weak as it was in the early 1990s, the economy was in far better shape.

"Back then we had a global recession, falling commodity prices, the `mother of all Budgets', high unemployment and job losses at every turn."

Westpac economist Donna Purdue said that for the first time in 17 years consumers on balance expected to be worse off financially in a year's time and more considered it a bad time to buy major household items.

- NZ Herald

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