16 Jun 2010

Consumers' wallets expected to reopen

1:46 pm on 16 June 2010

Consumer confidence has rebounded to its second highest level in three and a half years, and at least one economist says that that should translate into more spending.

The Westpac McDermott Miller Consumer Confidence Index rose almost five points to 119.3 in the June quarter. A reading of more than 100 indicates that optimists outnumber pessimists.

A senior economist at Westpac, Donna Purdue, says that confidence remains well above the long-term average and that the latest improvement is relatively broad-based.

It's clear, she says, that people are increasing their purchases of major household items in order to beat the upcoming increase in GST.

4% lift in spending possible

Ms Purdue says consumer spending could pick up by as much as 4% in the coming year, as consumers start to feel more confident about opening their wallets.

Factors such as falling unemployment, improved business confidence and hiring intentions, tax cuts and a positive outlook from Fonterra should continue to boost spending beyond then, she says.

Westpac's senior economist, Donna Purdue, says confidence remains well above the long-term average, and the latest pick up is fairly broad-based.