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Consumers are heading into Christmas at their most confident in more than a year, having put fears of an economic slowdown behind them thanks to lower petrol prices, plentiful jobs, fresh heat in the housing market and higher welfare payments.
The Westpac McDermott Miller Consumer Confidence Index, released today, rose to 119.7 in the December quarter, its highest since September last year. A reading above 100 indicates that optimists outnumber pessimists. The eight-point leap from the previous quarter was the largest increase in five years and was led by a 15-point surge to 125 among Auckland consumers.
Westpac chief economist Brendan O'Donovan said even accounting for the usual seasonal boost, confidence was at "elevated levels".
"We don't have to look hard to find reasons for consumers' cheerful mood. Petrol prices have fallen; the housing market is resurgent, the unemployment rate remains near historic lows and the Government's Working for Families package is providing a boost to low and middle-income families."
Coming just days after strong real estate and retail sales numbers and yesterday's robust business confidence data, the surge in consumer confidence will be of little comfort to the Reserve Bank.
The RBNZ has warned that unless it sees softening domestic demand and a sustained slowdown in the housing market, it will hike interest rates next month in order to curb inflation.
O'Donovan also said much of the index's gain came from a swift U-turn in consumers' expectations about the short-term economic outlook and a rapid improvement in their perception of their own financial position.
A net 15.8 per cent thought the economy would be better next year against the net 5.2 per cent last quarter who expected it to worsen.
Meanwhile, a net 13 per cent of respondents said they were better off than a year ago, the highest level in two years and a sharp turnaround from a net 0.5 per cent in September who said they were worse off.
"It seems consumers have brushed off the unease they felt in the first half of this year. The upshot is that the domestic economy should maintain momentum for a while yet."
However, there was a slight decline in the number of respondents who believed now was a good time to buy a major household item - believing their purchasing power has eased.
