NZ: Consumer confidence hits the back button - ANZ

Cameron Bagrie, Chief Economist at ANZ, notes that the NZ’s consumer confidence hit the back button in April as the ANZ-Roy Morgan Consumer Confidence Index eased from 125.2 to 121.7 in April.

Key Quotes

“Still above average and doesn’t look like anything more than monthly ping pong. It takes consumer confidence back to the levels seen in September last year.”  

“The Current and Future Conditions Indexes eased 3 and 4 points respectively. At 123.2 and 120.8, the levels for both indexes remain respectable. In terms of the details:

• Consumers still feel better off, though marginally less so. A net 9% feel better off financially compared with a year ago, down from a net 13% last month. There was little flip-flop in enthusiasm to buy a major household item; it barely budged, moving from +38 to +37. It’s been dillydallying around the 40 mark for three years now.
• Forward-looking indicators tottered lower. Net optimism towards the economy one year out eased from +21 to +14 and when assessing the five-year outlook, was marked lower from +22 to +15. However, respondents’ views towards their own financial situation in 12 months’ time lifted a touch to a net +33%.
• Consumer confidence swung lower in Auckland.”

“A likely reason behind the easing confidence is a slow-down in the property market, notably in Auckland. While annual house price inflation figures are still showing positive numbers, more timely quarterly figures show house prices are down in the region, and this goes straight into perceptions about feeling better off or not. And there are growing expectations that interest rates are going to be moving up too, if ANZ’s Business Outlook survey is anything to go by; a net 65% expect the next move to be up.”

“But such factors are a blip in the overall scheme of things. Jobs remain aplenty. Wages are set to sway higher. A moderating housing market and higher interest rates are a critical part of the recipe for extending the good times for all. Too often the New Zealand economy has failed to ‘see’ the warning signs associated with too much Kool-Aid at the top of the cycle, and subsequently ‘saw’ the consequences.”

“So we’ll take an oscillating pattern for consumer confidence at elevated levels as a continuation of the merry-go-round.”

“Our confidence composite gauge (which combines business and consumer sentiment, and so covers both the production and spending sides of the economy) continues to flag good economic momentum. Consumer confidence and firms’ own activity expectations are north of average. Prospects are the same for GDP growth.”

“Despite a slowing housing market, house price inflation expectations lifted again – weighing on first home buyer aspirations. The move from 4.6% to 5.2% is not a major surprise but the 18-24 year age group came in at 8.5%, which is the highest seen in this group since the series began.”

“Inflation expectations hit 4.0% for the first time in 17 months. This is the first move upwards after two falls (in a volatile series) so we won’t get too excited just yet, but it reflects similar sentiment from the business sector.”