Confidence back with bells on

Consumer confidence has rebounded sharply in December, according to the latest Westpac consumer confidence survey.

“New Zealand households have regained their festive spirit,” said Westpac Senior economist Satish Ranchhod.

The Westpac McDermott Miller Consumer Confidence Index rose 10.9 points in December to a level of 106.

“While [ that number is] a little below its long-run average, it has reversed the falls that we saw earlier in 2020 in the wake of the Covidoutbreak,” Ranchhod said.

Spending appetites were on the up as we headed into the holiday season. “Notably, there has been a sharp rise in spending on dining out and entertainment,” he said. “Plus, with overseas holidays still off the cards, many families are [exploring] the country.”

It was a more of a mixed picture when it came to spending on durables. Over the past few months, household spending had risen on furnishings and other household items.

“However . . . the number of households who thought it was good time to make a major purchase remained quite low in December,” Ranchhod said.

“We suspect this might reflect concerns about [availability] with widespread reports about shipping delays in recent weeks.”

Domestic economic activity rebounded and there are signs of growing momentum as we head towards the new year.

“Most importantly, recent weeks have also seen increasingly positive news regarding vaccines,” Ranchhod said.

“Together, those developments have left households feeling much more optimistic about the state of the economy over the next few years.”

Another big factor likely to have affected household confidence was the strength of the housing market. Mortgage rates had hit record lows in recent months and house prices have been rising rapidly.

Confidence was up across all regions. It was highest in Hawke’s Bay, Wellington, Bay of Plenty, Northland and Auckland. It was lowest in Otago and Canterbury.