Consumer confidence back to normal

Consumer confidence has rebounded to normal levels as the dust settles following last year‘s change in government.

The number of people who spent more on luxuries such as eating out hit an 11-year high. Photo: 123RF

The Westpac McDermott-Miller Consumer Confidence Index rose 4 points to 111 in the three months to March. The index had hit an 18-month low of 107.4 at the end of last year.

A reading above 100 indicates more optimists than pessimists.

Respondents were more upbeat about their own financial situation and the economic outlook.

The appetite to spend has also grown.

The number of people who spent more on luxuries such as entertainment and eating out hit an 11-year high, while more consumers now think it‘s a good time to buy a major household item, snapping a two-year run of declines.

Low mortgage rates also meant people were more willing to take on debt.

Westpac senior economist Satish Ranchhod said the brightened sentiment was largely due to things calming down in the aftermath of last year‘s election.

“What we saw last year was a drop in consumer confidence as we saw a bit of uncertainty around the election.

“Now, it‘s a few months later, households are feeling a bit more secure. We‘ve also seen a pushdown in mortgage rates and an improvement in the housing market.”

The number of people willing to take on debt also increased, which could have detrimental long-term effects, Mr Ranchhod said.

With debt levels already hitting record highs – and mainly tied up in housing – he warned any changes the new government made could have a severe impact on people‘s pockets.

“We expect house price inflation will slow down, and that will pass on to softer spending.”

Government policy – particularly on housing – would largely dictate consumer confidence, Mr Ranchhod said, but international developments could also change sentiments.

“There‘s a bit of uncertainty around the global trade environment, and while New Zealand‘s been pretty well insulated so far, there‘s always a risk that things get a little more severe going forward.”