NZ consumer confidence improves in October, pointing to strong economic growth

New Zealand consumer confidence rose in October as rising house prices and a strong labour market keep people upbeat, further supporting economic growth.

The ANZ-Roy Morgan consumer confidence index increased to 122.9 last month from 121 in September, with people more optimistic about the country's outlook. The current conditions index slipped 1.4 points to 122.7 while the future conditions index gained 4.1 points to 123.1.

New Zealand's economy has been underpinned by an expanding population, strong tourism, and a buoyant property market stoking consumer spending while the labour market has remained robust with new jobs being created for the inflow of migrants.

"GDP (gross domestic product) growth is accelerating and the unemployment rate has fallen to 5.1% as good candidates become harder to find," ANZ Bank New Zealand chief economist Cameron Bagrie said in a note. "House prices remain a strong platform for homeowners and dairy prices have crossed the floor. No wonder consumers are electing to be liberal with their spending."

ANZ's composite confidence gauge, which combines the business and consumer indicators, estimates annual GDP growth rising to 4% through the rest of the year, though Mr Bagrie said a lack of capacity seems a more likely hindrance than dwindling demand.

"We expect wage growth to start to move higher soon, which would be another positive for consumers," he said. "There is little debate: People are feeling pretty good."

A net 11% of the 1,001 people surveyed said they were better off now than a year ago, unchanged from September, while a net 30% expect to be in a stronger financial position 12 months from now, compared to 31% a month ago.

More people see the economy improving with a net 21% predicting better times for the nation over the coming 12 months, compared to 12% in September, and 18% have an upbeat five-year outlook, up from 14%.

Households were still optimistic about spending, with a net 35% saying now was a good time to buy a big-ticket item, down from 38% in September, and annual inflation expectations eased to 3.1% from 3.6%. Respondents also scaled back their outlook on house price inflation to an annual 5.7% pace over the next two years from 6.3% in September.

(BusinessDesk)