Inflation expected, farmers happy
AUCKLAND: Inflationary pressures are creeping up, the latest ANZRoy Morgan consumer confidence index showing people expect prices to rise at a faster pace.
Farmers, meanwhile, are feeling more upbeat as the latest Federated Farmers survey shows the greatest optimism since the Labourled coalition government was formed in late 2017.
The 998 people surveyed by ANZ expected annual consumer inflation of 3.7% over the next two years, up from 3.1% in the previous survey. They expected house price inflation of 4.4%, up from 4.1% in December. It was the strongest since May 2017.
Separately, Westpac New Zealand noted yesterday that house prices were rising much faster than the central bank had anticipated and ‘‘highsingledigit house price inflation is now almost universally expected.’’
That was a factor that led its economists to forecast the Reserve Bank might shift to a neutral official cash rate outlook at the February monetary policy review. The central bank cut the rate by 75 basis points last year to 1% and has indicated it would cut further if necessary.
‘‘We think the RBNZ will abandon this strong easing bias and move to a more neutral monetary policy outlook,’’ Westpac said yesterday. The next rate review will be on February 12.
Despite the expected price hikes, the ANZ survey showed a net 49% of respondents said it was a good time to buy a major household item, up from 44% in the prior survey. ‘‘This is only the third time the series has touched this level since January 2014 and will support retail sales and inflation,’’ ANZ New Zealand chief economist Sharon Zollner said.
Overall, the consumer confidence index was at 122.7 versus 123.3 in December, above the longterm average of 120.
‘‘Households aren’t gung ho, but are feeling resilient,’’ Ms Zollner said.
A net 11% said they were better off now than they were a year ago, down from 19% in the previous survey. Looking ahead, a net 30% expected to be better off in a year, unchanged from December. The latest confidence survey from Federated Farmers showed farmers were feeling more positive than they were six months ago, although very few believed general economic conditions would improve in the year ahead.
A net 24.6% of the nearly 1500 farmers who responded were positive about current economic conditions, versus a net 3.6% who were upbeat in the previous survey in July.
And while a net 45.8% of them expected economic conditions to worsen over the next 12 months, that was a 5 percentage point improvement on the earlier survey.
While dire, it was the first positive change in forwardlooking expectations since that benchmark peaked in July 2017, the Fed’s economic and commerce spokesman, Andrew Hoggard, said.
Only 4.3% were tipping an improvement and 46.4% expected no change.
Compared to July, the proportion of farmers expecting profitability to improve was up 3 points at 24.1%; those expecting it to deteriorate was down 4 points at 21.4%.