Consumer confidence low, latest results show

AUCKLAND: Homeowners are remaining cautious as the value of their largest asset goes down and spending power diminishes amid high inflation, according to new research.

The ANZRoy Morgan Consumer Confidence Index ticked up three points in August to 85.4.

However, confidence remains at very subdued levels compared with the 97.7 points in January’s survey, after the country’s move out of the alert level system in December.

Confidence plunged in February and hit a yearlow of 77.9 points in March after the Omicron variant arrived in New Zealand.

Consumers’ economic outlook in 12 months’ time improved from 43% to 35%. The fiveyearahead measure lifted from 5% to +2%.

In its recent survey, the proportion of people who believe it is a good time to buy a major household item lifted eight points to 17 points, its highest reading since January, but still very low.

According to the research, households are not happy with higher living costs and are worried about the economic outlook.

A net balance of 25 said they felt their family was financially worse off than this time last year.

Annual inflation hit 7.3% in the June quarter — its highest since 1990.

This was largely driven by rising rents and construction costs, while the 32% increase in petrol prices in the year to the June 2022 quarter also had a big impact.

In order to keep inflation under control, the Reserve Bank (RBNZ) has been raising the official cash rate at pace. It is now at 3%, its highest level since 2015, from record lows at the onset of the pandemic in 2020.

Consumer inflation expectations remain far too high at 5%, the research said.

New data from Stats NZ showed retail sales have declined for the second quarter in a row.

The volume of total retail sales fell 2.3% in the June 2022 quarter, after a 0.9% decrease in the March 2022 quarter when adjusting for price and seasonal effects.

To get inflation down, the Reserve Bank would need to see consumption slow markedly, ANZ said.

ANZ is expecting the RBNZ to keep hiking the OCR in 50bp steps in the remaining two meetings this year.

House price inflation expectations were little changed at 0.9%, according to the research.

The redhot housing market during the first year of the pandemic — largely fuelled by recordlow interest rates — has been steadily falling.

The national median house price was $810,000 in July, down from $850,000 in June.

But despite the value of properties falling, this was offset to some extent by a supertight labour market where incomes were looking secure, and rising, the research said. —