New Zealand Consumer Confidence Falls to Record Low (Update1)

By Tracy Withers


July 7 (Bloomberg) -- New Zealand consumer confidence has fallen to a record low as the economy faces a recession and unemployment rises, according to a survey.

Forty nine percent of 1,119 people surveyed in the two weeks ended June 29 said it was a bad time to a major household item buy, up from 45 percent in a poll completed two weeks earlier, research group Roy Morgan said in a statement on its Web site. Thirty five percent said it was a good time to buy.

New Zealand's economy contracted in the three months ended March 31 and eight of 13 economists surveyed by Bloomberg News expect a contraction in the second quarter, putting the economy in its first recession since 1998. Record-high interest rates are crimping confidence and spending, say retailers.

``The deterioration in confidence bodes ill for retail spending,'' said Shamubeel Eaqub, economist at Goldman Sachs JBWere Ltd. in Auckland. ``Current confidence levels match the lows seen in the early 1990s' recession.''

Sixty four percent of consumers expect the economy will deteriorate over the next year and 58 percent said they are financially worse off than a year earlier, Roy Morgan said. A record-high 33 percent of people expect to be worse off in a year.

Roy Morgan's overall confidence rating fell to 82 from 87.6 in mid-June.

Profit Outlook

Employment fell by the most in 19 years in the three months ended March 31, while the jobless rate increases to 3.6 percent from 3.4 percent. The central bank expects the jobless rate will rise to 4.6 percent by the first quarter next year.

Warehouse Group Ltd., New Zealand's biggest discount retailer, last month cut its profit forecast 10 percent, citing a slump in spending as food and fuel costs soar.

``I don't think there's a household in the country that's not under pressure financially from the burden of these higher food and petrol costs,'' Chief Executive Officer Ian Morrice said in a June 27 interview.

Reserve Bank Governor Alan Bollard said last month that slow growth means it is ``likely'' he will cut the official cash rate from a record 8.25 percent this year. Twelve of 13 economists surveyed by Bloomberg News predict a rate reduction by September.