Quarterly indicators are the highlights of the data calendar right now, with our Q1 consumer confidence survey released last week and the final December quarter indicators due this week.
The Westpac McDermott Miller consumer confidence index fell slightly in March, to 114.7 from 116.9, largely driven by a drop in expected future conditions. While confidence has slipped from its peaks in the last six months, it remains comfortably above its long-run average.
The slight drop in consumer confidence was much as expected, given that not much went the consumer’s way in late 2009 and early 2010. Interest rates rose, petrol prices rose, and unemployment worsened. The housing market experienced a jarring slowdown, which may have affected confidence among homeowners. Little wonder that consumers were more despondent about their personal financial situation, with a net 22% of respondents saying they were worse off than a year ago, compared to 21% last quarter. On the plus side, the stronger New Zealand dollar helped to keep prices down, especially for durables, and a higher number of respondents said that now is a good time to buy a major household item.
The overall level of the confidence measure is consistent with modest growth in consumer spending, just not as emphatic as in the latter part of 2009. That should help to ease the Reserve Bank’s concern – raised again in March’s Monetary Policy Statement – that the recovery in spending could escalate into a return to the borrowand- splurge behaviour seen in the last economic cycle.
