CONSUMER CONFIDENCE BOOSTS NZ SALES.

At the outset of 2004, consumer confidence in New Zealand was at a six-year high, and that will be reflected in strong demand for high-end durables throughout the year. Interest rates are likely to rise over the next few months, but not enough to put a dent in retail sales.

Bank lending to the housing sector during 2003 was roughly double that registered a year earlier. New Zealands confident consumers will remain willing to make financed high-end purchases in 2004. However, demand for residential real estate should cool a bit by the third quarter as the effect of higher mortgage interest rates sets in.

The New Zealand dollar gained 25 percent in value relative to the U.S. dollar during 2003, and is likely to remain strong throughout this year. As a result, demand for imported durable goods will remain strong and sales growth will peak at nearly 10 percent in either the second or third quarter.

Profit margins on imported goods and services are healthy thanks to favorable currency factors. Downward pressure on prices of imports should persist through the first half of this year, forcing local producers to trim profit margins. Import categories that are positioned to enjoy strong sales growth during 2004 are furnishings, appliances, and household electronics products.