January drop in consumer confidence

The ANZ-Roy Morgan Consumer Confidence index for January is marginally lower at 97.7 from 98.3 in December, with fewer people feeling better off financially at present and only slightly more cheery about their prospects over the coming year.

“Households’ budgets are under cost of living pressure, particularly punitive for those who operate with very small buffers between incomes and outgoings, and who spend a large proportion of their income on necessities,” ANZ chief economist Sharon Zollner said.

The labour market was strong and job prospects excellent, but most workers would still be out of pocket as wage growth lagged the rise in prices, she said.

Pessimism still dominated the near-term outlook, and there was reduced appetite for buying a big-ticket item such as a new appliance or car, with a net 4 per cent saying it was not a good time to buy.

“The housing market is cooling rapidly. . . Not the best time to splurge, appears to be the consensus,” Zollner said.

Respondents’ inflation expectations rose to 5.8 per cent, but growth in house prices was expected to remain softer.

Consumer prices rose 5.9 per cent in the year ended December, with expectations it will head higher in the early part of the year before gradually starting to ease, prompting the Reserve Bank to continue to raise interest rates to counter the inflation surge, which would increase household borrowing costs.

Confidence was strongest in the Wellington region and weakest in the South Island outside of Canterbury.