New Zealand consumer confidence slumped in the fourth quarter on concern the European debt crisis may lead to a global economic slowdown and tighter credit, a private survey showed.
An index of household sentiment fell to 101.3 from 112 in the third quarter, Westpac Banking Corp. (WBC) and McDermott Miller Ltd. said in an e-mailed report. Confidence is the lowest since the first quarter, immediately after an earthquake devastated the South Island city of Christchurch.
Falling confidence suggests weak consumer spending in the near term that would mean no interest-rate increases from the central bank, Westpac said. Reserve Bank Governor Alan Bollard on Dec. 8 signaled he will leave the official cash rate at a record-low 2.5 percent until mid-2012.
“Evidence has mounted that the domestic economy entered something of a lull in the second half of the year,” Westpac Chief Economist Dominick Stephens said in the report. The report “points to a retrenchment in consumer spending early next year,” he said.
The New Zealand dollar’s 7.6 percent drop against its U.S. counterpart in the past three months is the biggest decline among Group of 10 currencies. It bought 76.21 U.S. cents at 12:04 p.m. in Wellington from 76.44 cents immediately before the report.
Eleven of 16 economists surveyed by Bloomberg News expect Bollard will keep borrowing costs unchanged until at least September. None expect an increase before June.
The fourth-quarter decline in consumer confidence is steeper than the slump in the first quarter, when the index fell to 97.9, Auckland-based Westpac said. Before then, the index had been above 100, which indicates optimists outnumber pessimists, since the first quarter of 2009.
“Confidence is one of the channels through which the European crisis could impact on New Zealand,” Stephens said. “Now both business and household surveys show confidence has, at the very least, become much more fragile.”
Business confidence rose in November for the first time in four months, ANZ National Bank Ltd. said last month.
The consumer survey of 1,567 people Dec. 1-11 showed a sharp decline in willingness to buy large-ticket items, Westpac said. A net 13 percent said it is a good time to buy, down from 30 percent three months earlier. The net figure subtracts pessimists from optimists.
A net 22 percent expected bad economic times over the next year, and fewer respondents saw better economic times in the next five yeas, Westpac said.
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