Consumer confidence lifts in third quarter; rural least cheery

New Zealand consumer confidence picked up in the third quarter while staying below its long-run average, as Kiwis, particularly in rural communities, remain nervous about the economy's trajectory.

The Westpac McDermott Miller consumer confidence index rose two points to 108 in the September quarter, below the long-run average of 111.5. A reading above 100 indicates optimists outnumber pessimists. The present conditions index fell 0.8 points to 109.2, while the expected conditions index gained 3.9 points to 107.2.

The survey follows government figures last week showing gross domestic product expanded 0.9% in the June quarter, a slower-than-expected pace partly reflecting an upward revision in the first quarter, as the nation's massive pipeline of building activity and booming housing market continued to underpin activity.

A net 1.8% of the 1559 people surveyed expect the economic outlook to improve over the coming year, compared to a net 1.3% seeing a deterioration in the June quarter, while a net 15% see better times over a five-year horizon, up from 7.2% three months earlier.

Westpac Banking Corp acting chief economist Michael Gordon said households were feeling increasingly confident after firm economic activity in mid-2016, but there were still concerns about longer-term growth, with notable differences amongst different sectors of the population.

"Households in rural regions are particularly concerned about the economic outlook over the coming years," Mr Gordon said. "An extended period of challenging global demand and supply conditions means that many households in rural New Zealand have seen their incomes squeezed due to softness in commodity prices."

There were also clear confidence differences when considering income distribution, Mr Gordon said.

"Confidence has picked up among those households on mid to high incomes. However, those on lower incomes are less upbeat. In many cases, these households have highlighted that the financial circumstances remain challenging."

Households earning between $50,000 and $100,000 per year had the biggest confidence increase in the quarter, while households earning below $50,000 were least optimistic about their own financial situation and the country's economy going forward.

The survey, conducted between September 1 and September 11, showed respondents were much more likely to spend a cash windfall than to pay down debt, and the gap between the two groups is now the widest it has been since the survey began in 1998, encouraged by low interest rates.

(BusinessDesk)