The Westpac Melbourne Institute Index of Consumer Sentiment for New Zealand dropped 2.2% to 99.1 in March from 101.3 in February. This is around its average reading taken over the last six months. After the leadership change in the Federal Government in September, the index rose 8.3% in the subsequent two months and has largely held those gains.
Financial markets have remained considerably volatile. However, consumers seemed less focused on international events as compared to December. The highest levels of news recall were for items on domestic economic conditions and budget and taxation. However, the unfavourable media coverage on property markets and market volatility seems to have set off a reassessment of risk preferences.
Meanwhile, the index for unemployment expectations rose 1.3% to 147.3 in March from 145.3 in February. This gauges the respondents’ assessments of the forecast for the jobless rate. Hence a rise in the index shows lowered confidence in the employment outlook. The measure is still 5.8% lower than its September print, but has slowly increased from the October’s low of 134.9. However, labor market expectations are still significantly less negative at present as compared to what they were in 2014 and 2015.
Of the five components of the index, three dropped in March. One of the two components gauging family finances - ‘family finances compared to a year ago’- fell 8.2%. The central bank has signified that it finds this component as a reliable indicator of spending intentions. Meanwhile, the other family finances component rose 0.2. The components gauging the economic outlook view - ‘economic conditions over the next 12 months’ rose 8.2%, whereas ‘economic conditions in the next five years’ dropped 2.5%.
