Statistics out today in the latest Westpac McDermott-Miller Consumer Confidence survey show the index jumped to 116.6 in the June quarter, up from 110.8 in March and the highest level since June 2010 when it touched 119.3. Any reading over 100 indicates there were more optimists than pessimists.
Westpac chief economist Dominick Stephens said: “People are shifting out of saving mode and into spending model. The survey also chimes with our long-held view that low interest rates and a rising housing market would boost spending. The shift away from saving towards spending was especially pronounced among older households and Aucklanders – precisely those people who have benefitted most from the housing market upturn.”
The OCR was left at 2.5% last week but Governor Graeme Wheeler is keeping an eye on the property market and its potential to boost consumer spending, funded by increasing debt levels.
The survey showed a net 10.1% expect their own finances to improve, up from 7.2% in the previous survey. A net 35.4% expect their longer-term economic outlook to improve, up from 32.1%, and a net 34.4% think now is a good time to buy a major household item, up from 30.8%.
ASB chief economist Nick Tuffley said Wheeler would see the results as a sign the economy was finding a firmer footing. “It’s another sign that households are becoming a lot more confident and comfortable with their financial situations.”
He said the Reserve Bank had noted that rises in consumer spending could not be attributed solely to rising house prices and people doing work on their properties. But he said the results were more or less in line with expectations.
Tuffley said ASB was still predicting a rise in the OCR to 2.75% next March because there were signs that inflation pressure would gradually pick up over time. He said macroprudential tools could be used to delay an OCR rise, or limit the level to which it rose.
