Economy

Consumers and businesses feel the Christmas cheer

Consumer confidence has improved to its best level of the year on rising trust in the economy and financial security.

The Westpac McDermott-Miller Consumer Confidence index was up nearly seven points in December, reversing the drop seen over the past year, and it leaves the index around its long term average level.

Consumers were more upbeat about their own financial position, the short and long term outlook for the economy, and are more confident about buying a big ticket item.

Westpac senior economist Satish Ranchhod said the rise in confidence follows lower mortgage rates, and an improving housing market, and was seen across the country.

"Those developments are likely to have left many households feeling more optimistic about how their personal financial position is shaping up," he said.

The rise did not appear to just be a case of holiday euphoria either, with historical data showing confidence was just as likely to fall as it is to rise in December.

The number of households who expected to be better off financially in the coming year rose to its highest level since 2009, however, housing affordability remained a concern for some, and they were likely those who did not own a home.

"This may be one reason why even though confidence is up among all groups, the rise is most pronounced among those households on higher incomes," Ranchhod said.

The rise in consumer confidence boded well for retailers ahead of the crucial holiday shopping season, Ranchhod said.

"The proportion of households who think now is a good time to make a major purchase jumped higher in December and the numbers who have been ramping up their spending on entertainment activities remains at firm levels."

He expected the strength in spending appetites to continue into the new year.

It's not just consumers feeling more positive about the future - business confidence has improved to its best level in two years, but remains pessimistic.

The ANZ Business Outlook for December shows a net 13 percent of businesses expect conditions to deteriorate in the year ahead, half last month's pessimism level.

Individual businesses' confidence in their own outlook rose to a net 17 percent expecting to do better, the best level since April last year.

Firms expect to invest, hire staff, and export more, with fewer expecting profits to fall.

ANZ's chief economist Sharon Zollner said the lower interest rates and good commodity prices are supporting the economy, although headwinds at home and abroad persist.

This article was originally published on RNZ and re-published with permission.

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