Consumer confidence has fallen after two months of growth as the economic future remains uncertain. Photo / Consumer NZ
Consumer confidence has fallen after two months of growth as the economic future remains uncertain. Photo / Consumer NZ
Consumer confidence has fallen as Kiwis are more hesitant to purchase big-ticket items due to economic uncertainty, something likely to concern the retail industry.
The ANZ-Roy Morgan Consumer Confidence Index fell by four points to 96.0 in January, down from 100.2 in December.
ANZ chief economist Sharon Zollner said thatwhile there were drops across most indicators, the most relevant indicator for retailers is whether people think it’s a good time to buy a major household item.
“The indicator is well off its lows and likely still trending higher, but this month’s fall is a reminder that the environment for retailers is likely to remain patchy and challenging for some time yet.”
A net 16% of respondents to the survey thought it was a bad time to buy a major household item, falling by 15 points compared to December.
While the indicator is not as low as pre-November last year, January was a steep decline after two months of growth.
ANZ chief economist Sharon Zollner says that retailers should expect the environment to remain patchy for some time yet. Photo / NZME
The outlook of current perceptions of personal finance situations reflected the sentiment, falling three points to -17%.
Perceptions regarding the economic outlook in 12 months also fell three points to -15%, with the 5-year-ahead measure dropping slightly by two points to +5%.
As headline inflation remained at 2.2% in the latest consumer price index, two-year-ahead inflation expectations remained steady at 3.9%.
House price inflation expectations eased also, falling from 3.9% year on year to 3.1%, the lowest reading for the indicator in five months.
“Household inflation expectations have been very stable recently, but recent increases in petrol prices do highlight the risk that they start to rise again or at least bottom out for a period at rates significantly higher than pre-Covid,” Zollner added.
“Statistical analysis shows that petrol prices have an outsized impact on household inflation expectations relative to their share of spend.”
Petrol prices across the country are set to rise off the back of US-Russia tensions and a weaker New Zealand dollar.
AA principal policy adviser Terry Collins said that since December 16, the price of oil increased by US$10 a barrel, and believes Kiwis should get ready to see prices rise here by almost 10-20 cents a litre.
It’s not all bad news, however, with a net 23% of respondents expecting to be better off this time next year, up by two points compared to December.
“Like businesses, consumers are feeling much more upbeat than six months ago, but there has been some slippage as reality bites. The economy is typically a slow ship to turn,” Zollner said.
“It has turned in a more positive cyclical direction, but continues to navigate choppy seas.”
Zollner expects the Reserve Bank to cut interest rates by 50bps at its next update scheduled for February 19.
Back to Earth
Business confidence fell by eight points to 54.3 according to Westpac, while firm expectations for their trading activity fell 4.5 points to 45.8.
Westpac senior economist Michael Gordon said the result wasn’t entirely surprising given the gap between expectations and recent business performance.
“Both of these are still relatively high readings – coming off what were at or near 10-year highs in December – but they go against the run of strong gains in recent months.
“The startlingly weak GDP figures that were published in December may have also worked to bring those lofty expectations back down to earth.”
Gordon said that firms' own pricing intentions have risen in six of the past seven months as the number expecting their costs to rise also grew, at least somewhat reflecting the weaker New Zealand dollar.
Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.
