Economic weather report: Why a recovery in consumer spending may be gradual

Alex Tarrant presents an Economic Weather Report in association with BNZ. Watch on our video page here. Watch on YouTube here. This week we have had two surveys which, together, may show why a recovery in consumer spending may be slow and gradual. The first survey was the Quarterly Survey of Business Opinion (QSBO) released by the NZIER, showing headline business confidence stabilised in December from September. However, the NZIER economists focused on the point that businesses were 'waiting for reality to catch up with expectations' - in other words, the economic climate in December was not where they had expected it to be earlier.

The example used by NZIER was firms' hiring intentions. They said that firms had not acted on hiring workers as much as they said they intended to do so. The second survey was the WestpacMcDermott Miller Employment Confidence Index, which showed headline business confidence rose slightly in December from September. However, there were a few mitigating factors, the principal one being workers' perceived job security. This measure actually fell during the quarter. By combining the two surveys it might be assumed that workers in September began to feel slightly more confident about their job security as they saw firms' hiring intentions rise. However, as it transpired, firms did not hire as many workers as they had intended, which may have cast some doubt into workers' minds on whether their job was as secure as they thought. With firms hiring less workers than planned, and workers less sure about their job security, this may mean the recovery in consumer spending will be slow and gradual in contrast to some predictions. See here for Rodney Dickens' December raving: Why the RBNZ's forecast for weak consumer spending growth is wishful thinking.