ANZ-Roy Morgan New Zealand Consumer Confidence - Summer Break

SUMMARY

• ANZ-Roy Morgan New Zealand Consumer sentiment eased, but remains well above its recent lows. Current expectations held firm, while future expectations waned.
  
  
• Softer future expectations suggest consumers aren’t getting ahead of themselves just yet. To a degree this is encouraging; borrow-and-spend style growth can only take us so far – you have to pay it back!
  
  
• Reasonable consumer confidence and the same for business sentiment signals respectable but not stellar growth over the months ahead.
  
  
• Reversing last month’s moves, inflation expectations fell, while house price growth expectations bounced. Both continue to bounce around.

ANZ-Roy Morgan New Zealand Consumer Confidence put its feet up in December, easing off November’s six-month high. The ANZ-Roy Morgan Consumer Confidence Index fell 4 points to 118.7. That’s in line with the historical average.

Key results included:

• Confidence in the economy took a day trip, retracing some of its recent gains. Net optimism in the economic outlook one and five years ahead fell 9 and 5 points respectively to +6 and +17. The former is in line with its historical average, while the latter is slightly below.
  
  
• A net 6% of respondents are feeling financially better off compared to 12 months prior. That is down 3 points, and expectations 12 months ahead eased by a similar amount (to +26). Still positive.
  
  
• A net 38% still believe it a good time to buy a major household item - a six-month high. Get those letters to Santa written!
  
  
• The Current Conditions Index dipped 1 point to 122.1 – this is only a modest retracement from last month’s 8 point gain so there is still some Christmas cheer for retailers; ho ho ho!
  
  
• The Future Conditions Index fell 6 points to 116.3. Be careful not to over-spend, those credit card bills will be arriving in the New Year.
  
  
• ANZ-Roy Morgan New Zealand Consumer Confidence fell in all regions (in seasonally adjusted terms), but particularly so in the South Island regions.

The approaching festive season usually leaves consumers feeling in better spirits. Allowing for that, our seasonally adjusted estimates show slightly larger falls in overall confidence and the current conditions component. However, as with the unadjusted figures, both components remain well above recent lows – and in fact historical averages. Confidence wobbles around from month to month, but what matters is the level; that remains respectable.

The fact that consumers are feeling a little more cautious regarding the future should not necessarily be seen as a bad thing. A key theme driving housing activity in particular of late has been a return to borrow-and-spend style growth. Household credit is again running ahead of incomes. To be fair, this is the very behaviour that monetary policy easing is trying to achieve to help generate a spending and inflationary lift. But with debt-to-income ratios already elevated, household saving turning negative (again) and the current account deficit on a widening trajectory, this can only be a temporary phenomenon. Borrow-and-spend behaviour can only take us so far. Some restraint and prudence goes a long way too.

When combined with business confidence, our confidence composite still points to respectable prospects for the economy heading into 2016. People need an aura of confidence to spend, businesses need it to be willing to hire and invest; we have that. Yes there are risks. Dairy sector strains remain, and the weather heading into summer, while good for beach-goers, may not be so good for growing grass. The global scene continues to wobble. But improved momentum and sentiment over the second half of the year hopefully reflects how many will feel after the upcoming summer break – relaxed, refreshed and in a good position to continue the good cheer into the New Year.