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Consumer confidence gets dairy boost

NZN 18/12/2016 Rebecca Howard

New Zealand consumer confidence posted its biggest lift in four years in the December quarter as rural communities were more upbeat after gains in dairy prices.

The Westpac McDermott Miller consumer confidence index rose 5.2 points to 113.1 in the December quarter, above the long-run average of 111.4. A reading above 100 indicates optimists outnumber pessimists.

The present conditions index rose 2.2 points to 111.4, while the expected conditions index gained 7.2 points to 114.3.

A net 18 per cent of the 1,554 people surveyed from December 1 - 10 expect the economic outlook to improve over the coming year, compared to a net 1.8 per cent seeing an improvement in the September quarter.

"Gains in confidence have been widespread," said Westpac Banking Corp acting chief economist Michael Gordon. "Notably there's been a marked lift in confidence among rural households. This follows strong increases in global dairy prices in recent months."

Since July the price of whole milk powder - New Zealand's key commodity export - has soared almost 75 per cent. Last month, Fonterra hiked its forecast payout to its 10,500 farmer shareholders to $6 per kilo of milk solids for the current season, versus $3.90 in the prior season.

Mr Gordon noted there has also been an increase in confidence among households on lower incomes, as the labour market strengthens on the back of solid economic activity.

Data this week is expected to show New Zealand's economy to have extended a steady growth rate for the fifth straight quarter. Economists are tipping third quarter growth of 0.9 per cent, supported by low interest rates, a large pipeline of construction work, rapid population growth and strong tourism.

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