- ASB
Consumer confidence in New Zealand worsened in the first quarter, as continuous drops in dairy prices and volatility in global markets weighed on sentiment. The Westpac-McDermott Miller consumer confidence index slid to 109.6 from 110.7 in the previous quarter. Consumer moods on current economic conditions were largely flat this quarter, but sentiment about future conditions declined. While consumer spending has been strong over the last year, economists are worried that the full impact of the dairy slowdown is yet to be felt.
Earlier this month the Reserve Bank of New Zealand slashed the official cash rate to a record-low 2.25% as dairy prices were continuing to fall and it seemed longer for inflation to reach the central bank's 1-3% target range. Most economists expect the RBNZ to cut the interest rates once more this year, following up its surprise cut to a record-low 2.25% with another by June. However, ASB's economist team is now predicting two more OCR cuts this year, forecasting that the RBNZ will not meet its inflation target otherwise as the effect of the RBNZ's cut earlier this month has not been fully passed on to borrowers and the New Zealand Dollar has since appreciated.
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