But pessimists still outnumber optimists
Consumer confidence has increased to its highest level since January last year, but remained “very subdued,” as Kiwi households continued to be battered by financial pressures.
The ANZ-Roy Morgan Consumer Confidence Index jumped six points in June to 85.5, a still very low level that indicated pessimists still outnumbered optimists, but the figure was the best read in 18 months.
“The overall level of confidence remains very subdued,” said Sharon Zollner (pictured above), ANZ chief economist. “While job security is still excellent on the whole and wage growth historically strong, ongoing cost-of-living increases continue to bite. There have also been widespread headlines about recession in the past month.”
Zollner attributed that, in part, to the Reserve Bank signaling a likely end to its aggressive monetary policy tightening in its last statement. But possibly the biggest factor, she said, is a fall in inflation expectations.
Inflation expectations declined considerably from to 4.3%, from May’s 4.8% reading, which the economist said would very much please the central bank, as consumers are “half of the wage-negotiation process.”
“Lower inflation expectations signal that we’re likely to see consumer confidence continue to rise over coming months, barring any nasty surprises,” Zollner said.
The economist warned, though, that consumer confidence has “overstated the decline in retail spending, and any bounce-back in headline consumer confidence may correspondingly overstate the likely rebound.”
Consumers with mortgages were generally more pessimistic, except when it came to their personal financial situation in a year’s time, suggesting that people are expecting lower interest rates within that time frame, Zollner said.
The index also revealed the following figures:
- More people believe it is a good time to buy a major household item, a key retail indicator, rising seven points to -27
- Perceptions regarding the economic outlook in 12 months’ time rose nine points to -34%; and jumped -12% to +1% for the five-year-ahead measure
- House price inflation expectations surged from 0.4% to 1.6%, with Auckland posting the strongest improvement (13.1% versus 1.5% last month) but are now positive everywhere
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