New Zealand’s consumer sentiment falls slightly in March, economy’s path a concern in coming years

Consumers in New Zealand are slightly less positive about the economy. In the March 2016 quarter, the Westpac McDermott Miller Consumer Confidence Index dropped to 109.6 from December’s 110.7. This is slightly below the long-run average levels. In recent months there has been certain decline in sentiment. A hail of bad news hit the headlines during the beginning of 2016. Most of which was related to signs that global economic conditions have worsened, hinting challenging environment for many in the export sector. Also, with the constant fall in dairy prices, there has been major concern for dairy sector.

Consumers in New Zealand have become clearly nervous about the economy’s path due to these developments. The proportion of consumers expected good economic times in the next five years has declined t o the lowest level since 1991. However, the increased concern regarding the economy’s path does not always hint at risks on the downside for consumer spending in the following months. In spite of their concerns regarding the economic outlook, consumers continue to be more positive regarding their own economic situation. In fact, consumers expecting to be better off financially in one year’s time actually increased in March.

Consumers’ optimism of their own economic conditions indicates that even if they are uncertain about the economic outlook in general, it is expected that they continue to be in the mood to spend. In fact, there are reports from a rising proportion of consumers that they have increased spending on entertainment and eating out. Moreover, the number of consumers that think this is a good time to buy a major household item has continued to increase.

Low interest rates are clearly helping boost consumers’ spending appetites.  Also, other positive developments have helped boost consumer sentiment, such as strong growth in domestic economic activity and strengthening in labor market. Overall, the New Zealand’s economy, while still facing some problems, is moderately expanding. In line with this, consumer confidence is indicating towards around average rates of GDP growth.

Delving into details, the figures show major differences throughout the economy. Firstly, there is a divergence throughout regions even if the overall level of sentiment amongst consumers is slightly below average. Households in Auckland are noticeably more positive than elsewhere. Meanwhile, consumers in other parts of the nation are more downbeat with sentiment in most regions below long-run averages.

Secondly, sentiment levels continue to considerably differ according to consumer income levels. Consumers with higher incomes are more upbeat about the economic outlook, whereas the ones with lower incomes are more pessimistic and are mainly worried about where the economy is heading in the coming few years.