Editorial: Consumer confidence fall a worry as gloom sets in

The Westpac McDermott Miller Consumer Confidence Index released yesterday showed consumers are following the gloomy lead set by business owners this year. Photo / 123RF

Editorial

EDITORIAL:

Whether you believe this Government is to blame for the downturn, or that it is the victim of a political backlash, news that consumer confidence slumped to six-year lows in September is cause for concern.

The Westpac McDermott Miller Consumer Confidence Index released yesterday showed consumers are following the gloomy lead set by business owners this year.

Households are increasingly concerned about their financial prospects for the next 12 months.

The economists who conduct the survey say it is not clear whether this reflects the reality of a slowing economy or whether consumers are simply reacting to the highly publicised negativity of the business community.

Certainly factors such as the cooling housing market and rising fuel prices seem to be playing a part.

A clear divide has opened between gloomy Aucklanders - who have seen their housing market cool and a petrol tax introduced - and Wellingtonians who still enjoy double-digit house price growth.

Government critics will be quick to seize on the survey as further proof that the New Zealand economy story is turning sour.

It is worth noting though that the latest card data showed spending actually increased in August - across all six retail categories measured.

Local GDP data, due this morning, is expected to show growth bounced back in the second quarter.

Although it will be down from the peaks we experienced in 2015 and 2016 - it will be solid (tipped at an annual rate between 2.5 and 2.7 per cent) and reflect ongoing economic stability.

Unfortunately perception can create reality and there is risk that all this negativity becomes self-fulfilling.

There is an onus on the Government to restore confidence both by better communicating its vision for the economy and by achieving some policy wins in key areas.

But regardless of the Government's relative success or failure in the coming months, it would be foolish to let an overly gloomy mind set take hold.

Despite the 10 year anniversary of the Lehman Brothers crash prompting some sombre reflections on the prospects for the next financial meltdown in the past week – the global bull market rolls on.

The US economy is in full swing - with GDP growing above four per cent.

In fact, the US, Japan and to some extent Europe are just now fully emerging from the shadow of the 2008 financial crisis.

Chinese growth also remains solid particularly when it comes to consumer demand.

Even the escalating threat of a trade war with China has failed to rattle bullish US investors.

We can debate how sustainable it might all be under the leadership of a controversial and unconventional US President but, for now, the global economy presents opportunity.

Famously gloomy economist Nouriel Roubini – dubbed Dr Doom after he correctly predicted the 2008 crisis - recently predicted another major crash in 2020.

If he is correct and the good times are short lived, it only heightens the importance of New Zealanders making the most of benign economic conditions right now.

If business and consumers - and Government for the matter – use this period to pay down some debt and prepare for the next crisis well and good.

But it would be foolish to batten down the hatches for a storm that isn't due this year.

In doing that we may simply miss the chance to enjoy of the last of the golden weather.