Consumer confidence has found a floor after broadly trending down since March, according to the ANZ-Roy Morgan Consumer Confidence Index. The overall index lifted 4 points in November to around the historical average. The Current Conditions Index eased 1 point to 121, but the Future Conditions Index bounced back 6 points to 117, to levels more consistent with other readings this year.
- Consumers’ perceptions of their current financial situation dipped 1 point to a net 10% feeling financially better off than a year ago.
- A net 26% of consumers expect to be better off financially this time next year, up 6 points.
- A net 32% think it’s a good time to buy a major household item, down 1 point.
- Perceptions regarding the next year’s economic outlook lifted 8 points to a net 7% expecting conditions to improve. The five-year outlook lifted 4 points to +18%.
- Confidence in Wellington dropped 3 points to fall below Auckland (which rose 5 points to become the most confident region in the country, a marked contrast with business confidence). Canterbury is the weakest.
- House price inflation expectations were little changed around the country (2.9%). They are weakest in Canterbury (1.9%) and strongest in Other South Island (3.8%).
- Inflation expectations eased 0.1%pts to 3.4%.
Consumers are feeling pretty resilient, with confidence bouncing back to sit around historically average levels. Confidence about the future remains a bit further under par. However, the proportion thinking it is a good time to buy a major household item is holding up well enough to suggest spenders aren’t closing their wallets just yet.
A resilient consumer is of course good for near-term economic growth, but a degree of prudence is warranted too. Household debt has flattened off at very high levels – 167% of household disposable income – and any improvement from here will be a long, slow grind. The estimated saving rate, while imprecisely estimated and prone to large revisions, is currently negative, suggesting little evidence of a precautionary saving motive in action.
Our confidence composite gauge (which combines business expectations and intentions with overall consumer sentiment) continues to suggest a slowing in GDP growth by year end (figure 2). We suspect business sentiment indicators are overstating the power of the growth headwinds at present, and rather see growth holding up in a 2½-3% range. Given high debt levels, consumer retrenchment is certainly a risk that could exacerbate any slowdown, but it is unlikely to be the catalyst for such an event.
Click here to download the latest ANZ-Roy Morgan New Zealand Consumer Confidence Release PDF - November 2018.
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