Households are the least optimistic they have been about the coming five years since 2008, after consumer confidence fell in the June quarter into pessimistic territory, the Westpac-McDermott Miller Consumer Confidence Index shows.
The Index's headline confidence measure fell to 99.9 in June - just below the 100 mark representing balanced pessimism and optimism. That was down from 102.4 in March. Households’ expectations deteriorated for both their personal financial situation and for the broader economy, Westpac said.
Households’ near-term economic outlook was now the most pessimistic since March 2011, with a net 29% expecting mainly bad times for the economy over the year ahead. And households’ expectations for their own finances have turned pessimistic for the first time since June 2008, with a net 1% now expecting their situation to get worse over the coming year.
Over the longer term households remained optimistic on balance, with a net 27% expecting mainly good times over the next five years. However, this was the least optimistic they had been since mid-2008.
See the release from Westpac below:
The Westpac McDermott Miller Consumer Confidence Index fell to 99.9, down 2.5 points from March’s 102.4. “Today’s survey reveals a sharp contrast between how people feel about the here and now, and their concerns for the future,” said Westpac Chief Economist Dominick Stephens.
“Households have become more worried about the economy and how that might affect them. But at the same time they say they’re feeling financially better off than three months ago, and more willing to spend.”
“That seems a fair reflection of what’s actually happened over the past three months,” said Mr Stephens. “On the one hand the European crisis has been casting an increasingly dark shadow over the global economy. But the same time petrol prices have eased and mortgage rates have fallen to record lows, effectively putting more money in people’s pockets.”
“Importantly, it’s how people feel about today that seems to be the better guide to how much they will actually spend. In that sense today’s survey is a reasonably positive signal for retail spending,” said Mr Stephens. “Of course that could still change depending on what actually happens in Europe.”
The survey was conducted over 1-10 June, with a sample size of 1570. An index number of 100 indicates that pessimists outnumber optimists, although the series may be above or below 100 on average. The margin of error of the survey is 2.5% at a 95% confidence interval.
The components of the survey saw an improvement in households’ assessment of present conditions, outweighed by a deterioration in their outlook for the future. On balance 17% said they feel worse off financially than a year ago, down from 20% in March. Meanwhile the balance of those saying that now is a good time to buy a major household item increased from 17% to 20%.
Households’ expectations deteriorated for both their personal financial situation and for the broader economy. Households’ near-term economic outlook is now the most pessimistic since March 2011, with a net 29% expecting mainly bad times for the economy over the year ahead. And households’ expectations for their own finances have turned pessimistic for the first time since June 2008, with a net 1% now expecting their situation to get worse over the coming year.
Over the longer term households remain optimistic on balance, with a net 27% expecting mainly good times over the next five years. However, this is again the least optimistic they have been since mid-2008.
“Consumer confidence in New Zealand fell in the June quarter and is now marginally pessimistic,” reported Richard Miller, Managing Director of Strategy Planning Consultancy McDermott Miller.
“Consumers are feeling increasingly gloomy about the short-term prospects for New Zealand’s economy in the face of international economic uncertainty”, he said. “This pessimism is now carrying over into expectations on personal prospects. Indeed, the June result is the first time households have turned pessimistic about their personal finances since June 2008, and only the eighth time in the 97 quarters of the Westpac McDermott Miller Consumer Confidence Index.”
“The gulf between consumers working in the public and private sector has widened further,” noted Richard Miller. “Consumer pessimism persists in the public sector with their index now at 95.6, whereas private sector consumers remain optimistic at 108.2. Public sector workers are particularly gloomy about New Zealand’s short-term economic prospects, with a net 40% expecting bad times over the next 12 months, compared to 24% of private sector workers.”
“The main reason consumers give for pessimism over New Zealand’s short-term economic prospects is recession in the rest of the world (some 40% of those expecting bad economic times over the next year in New Zealand had this view, compared to around 29% in March). Europe’s precarious economic state was given special mention for the first time. However, a further 26% blamed government policies for New Zealand’s poor immediate outlook. The tendency to blame the government is higher among public sector (30%) than private sector (20%) consumers.”
“Retail trade statistics are consistent with declining consumer confidence,” Richard Miller said. “Statistics Retail Trade Survey data (revised 13 June 2012 release) show sales in core retail trade industries (seasonally adjusted and expressed in constant prices) for March quarter 2012 were 1.4% below December quarter 2011 sales.”
“The fall in consumer confidence does not necessarily presage a slump in retail spending, although we expect retail sales to continue to be tight,” Richard Miller noted. “Some reason for hope is the increase in the balance of households feeling that now is a good time to buy major household items.
Most consumers who think this way say they do so because of intense price competition among retailers (78% give this reason, up from 68% in March).”
“Unless there is better news on the international economy we expect Consumer Confidence in New Zealand to continue to stay down, and a slide into deeper pessimism is possible,” suggested Richard Miller. “If international uncertainty continues, the risk is consumer pessimism will increase and retail spending slow further”.
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