Consumer confidence has strengthened over the past three months, the Westpac McDermott Miller survey found, thanks to a rebound in rural New Zealand.
The survey's overall index rose 2.5 points to 117.4. That is comfortably above its long-term average of 111.5 and consistent with signs of buoyant retail activity in electronic card transactions data, said Westpac economist Felix Delbruck.
The improvement was unsurprising given further falls in petrol prices and fixed mortgage rates since the December survey, while house and share prices had continued to rise.
But Delbruck was surprised the gains had occurred entirely in rural regions and smaller cities, while sentiment in the three main centres moved marginally lower to be about where it was six months ago.
The latest survey, taken between March 1 and 11, followed two GlobalDairyTrade auctions in February, which recorded rises of 9.4 and 10.1 per cent.
Nevertheless, drought conditions in some areas and a continued decline in meat prices (down 15 per cent from their peak last September, according to ANZ's commodity price index) might have been expected to weigh on sentiment more than they did. The main centres are still more cheerful than smaller cities and rural districts, but Delbruck said the lack of exuberance in the latest survey was puzzling given the combination of cheap petrol, falling interest rates and rising asset prices.
One explanation might be that high and rising house prices were a mixed blessing, he said.
"Good for existing property owners, not so much for those trying to get on the property ladder."
And while the New Zealand dollar has fallen against the US dollar, it has moved sharply higher against the euro, yen and Australian dollar.
"That is not good news for export-oriented and import-competing manufacturers, who tend to cluster in the urban centres."
The survey found more people consider they are better off financially than a year ago and more expect to be better off in a year's time, by a net 1.7 and 2 percentage points respectively.
A net 27.8 per cent of respondents consider it a good time to buy a major household item, up 2 points from the December survey to levels that are around average for the survey's history, Delbruck said.
A net 23.8 per cent of respondents expect economic conditions to improve over the next year, up 7.3 points from December.
John McDougall of McDermott Miller said among respondents expecting good economic times over the year ahead, the most commonly cited reason was the effectiveness of government policy, while among those expecting bad times the percentage citing a poor outlook for farming fell from 23 per cent in December to 7 per cent in March.
Views on the economic outlook five years out slipped marginally from a net 27.2 per cent positive in the previous survey to net 26.8 per cent this time.
• Consumer confidence index up rose 2.5 points to 117.4.
• Comfortably above its long-term average of 111.5.
• Petrol prices and fixed mortgage rates are down since December survey.
• Net 23.8 per cent expect economic conditions to improve over the next year.