Consumer confidence wavers as New Zealand exits recession
As New Zealand steps out of recession, the recent economic data has sparked cautious optimism about the country’s financial trajectory, despite global economic uncertainties and domestic challenges.
However, ANZ-Roy Morgan’s latest report in March showed that consumer confidence has dipped to 93.2, marking the lowest level since October.
Despite some recovery in recent months, the path to economic optimism appears to be a challenging one.
The key indicator for the retail sector, reflecting the net proportion of households considering it a good time to buy major household items, has slightly decreased by one point to -16.
Economic indicators and consumer behaviour
Inflation expectations
Consumers have seen a slight increase in inflation expectations, now at 4.2%, the highest since mid-2024. This rise indicates a growing concern about the cost of living, which may be influencing spending habits and savings.
Financial outlook
The future conditions index, which measures expectations for the year ahead, has dipped slightly to 100.7, indicating cautious optimism among consumers.
The current conditions index, reflecting immediate economic situations, has fallen more substantially by 5 points to 81.9, suggesting increased consumer anxiety about the present economic climate.
Detailed consumer insights
Personal finance perceptions
A decline in the perception of personal financial situations continues, with net perceptions falling 9 points to -21%.
Only 24% of individuals feel they are financially better off than last year, a decrease from previous figures, while 44% feel they are worse off, showing an increase in financial dissatisfaction.
Purchasing sentiment
A consistent 29% of New Zealanders believe it’s a good time to buy major household items, barely changing from previous months, but 44% consider it a bad time, reflecting an increase in negative sentiment.
Economic projections and real estate
Real estate outlook
Expectations for house price inflation have seen a minor uptick from 3.2% to 3.4%, suggesting a slight increase in optimism in the real estate market.
Long-term economic views
The long-term economic outlook has improved marginally, with net perceptions for the next five years increasing from 5% to 6%, hinting at a slight rise in consumer confidence over the longer term.
Consumer challenges and responses
The challenges facing the industry are pronounced with the high cost of living impacting consumer capability to engage in the property market due to stringent lending conditions.
For instance, the 3% buffer on servicing rates is a significant barrier for many, especially first-home buyers. Reducing this buffer to 1.5 or 2% could potentially open up the market to many more potential homeowners, thereby stimulating economic activity.
