New Zealand consumer confidence drops to decade low
Consumer confidence in New Zealand has dropped to its weakest level in a decade amid rising prices and mortgage rates, falling house prices and global market turmoil, a survey found on Wednesday.
By Agencies |
WELLINGTON: Consumer confidence in New Zealand has dropped to its weakest level in a decade amid rising prices and mortgage rates, falling house prices and global market turmoil, a survey found on Wednesday.
The Westpac McDermott Miller consumer confidence index fell to 96.5 from 110 in December, the largest quarterly fall for nearly eight years.
"You don't have to look very far to find reasons for the dramatic fall in confidence this quarter," Westpac Bank chief economist Brendon O'Donovan said.
"Even so the extent of the fall in confidence this quarter has left us stunned."
A figure under 100 indicates most people surveyed are pessimistic about the economic outlook and the latest survey was the first time since 2000 that a negative figure was recorded.
The release of the survey follows a comment by Finance Minister Michael Cullen last week that the possibility of a technical recession -- two straight quarters of economic decline -- could not be ruled out.
The central bank expects economic growth to slow to less than two percent in the year to March 2009 and the following year from expected growth of three per cent in the current year.
Consumers' pessimism contrasted with a number of strong indicators in the economy such as the unemployment rate at a 21-year low, terms of trade at a 33-year high, and strong government accounts, Westpac said.
But if the global credit crunch worsened, the New Zealand economy would follow, O'Donovan said.
"The risk is that the collapse in sentiment is a slippery slope that is exacerbated by tightening credit conditions," he said.
The fall in consumer confidence may take some pressure off the central bank, which because of persistent inflationary pressures has not followed the lead of many other countries in cutting interest rates.
The Reserve Bank of New Zealand is mandated to keep inflation within a one to three percent band but forecasts prices will rise 3.4 per cent in the current year to the end of March.
The key interest rate, the official cash rate, is currently at 8.25 per cent, one of the highest in the developed world.
Those surveyed were asked questions including if they felt financially better or worse off and whether the economy would improve or decline over the next year and next five years.
The Westpac McDermott Miller consumer confidence index fell to 96.5 from 110 in December, the largest quarterly fall for nearly eight years.
"You don't have to look very far to find reasons for the dramatic fall in confidence this quarter," Westpac Bank chief economist Brendon O'Donovan said.
"Even so the extent of the fall in confidence this quarter has left us stunned."
A figure under 100 indicates most people surveyed are pessimistic about the economic outlook and the latest survey was the first time since 2000 that a negative figure was recorded.
The release of the survey follows a comment by Finance Minister Michael Cullen last week that the possibility of a technical recession -- two straight quarters of economic decline -- could not be ruled out.
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The central bank expects economic growth to slow to less than two percent in the year to March 2009 and the following year from expected growth of three per cent in the current year.
Consumers' pessimism contrasted with a number of strong indicators in the economy such as the unemployment rate at a 21-year low, terms of trade at a 33-year high, and strong government accounts, Westpac said.
But if the global credit crunch worsened, the New Zealand economy would follow, O'Donovan said.
"The risk is that the collapse in sentiment is a slippery slope that is exacerbated by tightening credit conditions," he said.
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The fall in consumer confidence may take some pressure off the central bank, which because of persistent inflationary pressures has not followed the lead of many other countries in cutting interest rates.
The Reserve Bank of New Zealand is mandated to keep inflation within a one to three percent band but forecasts prices will rise 3.4 per cent in the current year to the end of March.
ADVERTISEMENT
The key interest rate, the official cash rate, is currently at 8.25 per cent, one of the highest in the developed world.
Those surveyed were asked questions including if they felt financially better or worse off and whether the economy would improve or decline over the next year and next five years.
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