Consumer confidence fell in the December quarter to its lowest level in 18 months and is likely to reinforce the Reserve Bank's view that consumer spending will remain weak over the coming year, the Westpac McDermott Miller Consumer Confidence Survey shows.
The survey's confidence index fell for the second consecutive quarter, by 5.8 points to 108.3 in the December quarter from September. However the index remained above 100, suggesting more optimism than pessimism among respondents.
“Consumer confidence has fallen to its lowest level in eighteen months,” Westpac senior economist Donna Purdue said. “Moreover, the fall in confidence is widespread, with every income group, both sexes and almost every region showing declines. That means consumer spending is likely to remain fairly modest over the Christmas period,” Purdue said.
A combination of factors were possibly contributing to consumers increasing unease, including the early onset of drought in Northland and Waikato, the ongoing slump in the housing market (at least through to October), the rise in GST from 12.5% to 15% on October 1, and rising fuel prices in excess of GST, Purdue said.
"Add in the hard reality of life after the Canterbury earthquake (remembering that confidence in the Canterbury region actually lifted in the immediate aftermath of the earthquake according to our survey), and the Pike River Coal Mine disaster, and it is not hard to see why confidence is down," she said.
Despite recent income tax cuts, consumers had become more despondent about their own personal financial situation.
"A net 22% of respondents said they were worse off financially than a year ago, up from a net 17% last quarter, and the most since the June 2009 quarter. In terms of the coming year, consumers remain optimistic, with a net 8.5% expecting their own financial situation to improve over the next 12 months. However, that is down from 12.8% in the September quarter and the lowest since March 2009," Purdue said.
“Consumers have clearly become more cautious over the past few months, and indeed over the past year, despite falling unemployment, lower income tax rates, strong commodity prices (particularly in the dairy sector), and lower fixed term interest rates," she said.
“But even though these confidence figures suggest that consumers will remain cautious in the very near term, we continue to hold the view that consumer caution will not be sustained through 2011. As the economy gathers momentum over the coming year, bringing more jobs and income growth, we expect growth in consumer spending to match that of income, growing by around 2-3% per annum in real terms.”
(Update adds chart that also shows ANZ Roy Morgan monthly consumer confidence released yesterday)
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6 Comments
"we expect growth in consumer spending to match that of income, growing by around 2-3% per annum in real terms.”
Well I don't know about anyone else but any gains in income I manage to make are quickly gobbled up by stuff that doesn't show up on the CPI - rates, fuel and stealth taxes.
I just re rego'd my car - a diesel ute - just shy of $600. That's more than a months worth of discretionary spending gobbled up right there! A big spend up for Christmas? That was it, sorry kids.
I wonder on 2~3% more spending per annum....
So if rates and your ute costs (similar to me, oh and the WOF is up $7....) indicate anything that 2~3% more spending will go into areas that can charge (several times) more than the CPI...then on top of that we appear to have consumers saving/paying down debt....this seems to be an ongoing thing....so I can but see retailers like say Briscoe's, DSE, Warehouse (they just had a 25% toy sale Before Xmas!) having to live with the opposite....2 maybe 5% less spending per annum.....
Stealth taxes rising like zombies, you bet.....
This is a recovery? uh no....
regards
What you are forgetting is that if your income goes up 2%, and you currently pay 50% of your income into your mortgage, then your disposable income actually goes up 4% if you don't increase your mortgage payments. This would probably be the situation for a lot of people.
Fair enough JJ but I was referring to discretionary spending so the rates, rego, power bills, and so on need to come out of the disposable income before there is any discretionary. We used to reckon on about $150/week for discretionary but that is being chewed up with these stealth taxes. I don't have a mortgage.
Bernard reckons that $ 250 million is the cost of a big city hospital . And we're borrowing enough for one of them , every week .............. Guess we'll need all that extra bed-space in a few years , when all you stressed out tax-payers have to pony up , and pay the Bill .
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