Consumer confidence falls near three-year low

New Zealand consumer confidence fell near a three-year low this month as households turned sour on the economic outlook, although more remain positive rather than negative about their personal situation.

The ANZ Roy Morgan consumer confidence index fell to 113.9 in July from 119.9 a month earlier, with the current conditions index slipping 2.6 points to 119 and the future conditions index sliding 7.7 points to 110. While households were still relatively upbeat about their own finances, the outlook for the wider economy declined to one of general pessimism in the coming year.

"There is certainly a need to keep a close eye on the economic 'weather conditions' - it is possible that things will cool further in the near term," ANZ Bank New Zealand senior economist Philip Borkin said in his note. "But the embers to re-ignite the economy are still evident."

Today's survey follows the Westpac McDermott-Miller consumer confidence report, which showed households' optimism was at a two-year low in the June quarter as it was dragged down by the deteriorating outlook for the dairy sector.

The GlobalDairyTrade auction today showed an unexpectedly sharp 10.7 percent drop in dairy prices, prompting economists to rethink their outlook for Fonterra Cooperative Group's [NZX: FCG] forecast payout to farmers, which will likely put more stress on the dairy sector where a quarter of farms are already estimated to be operating in negative cashflow.

The ANZ survey showed a net 4 percent of the 989 respondents feel better off now than they did a year earlier, down from a net 7 percent in June, and a net 22 percent expect to be better off in a year's time, compared to a net 26 percent a month earlier.

Households' economic outlook deteriorated, with a net 2 percent expecting bad times ahead for the economy over the next 12 months, compared to a net 11 percent picking good times last month. They felt less negative about the longer term outlook, with a net 11 percent seeing good times over the next five years, down from a net 17 percent in June.

A net 34 percent of respondents said it's a good time to buy a major appliance, down from a net 38 percent in June, and the lowest reading in 18 months.

Consumer prices were seen rising at an annual pace of 3.7 percent over the next two years, up from a 3.4 percent pace in June, while house prices were expected to rise at a 5.2 percent pace, compared to 5.3 percent a month earlier.

(BusinessDesk)