Consumer confidence oscillates between surveys

Auckland, August 31, 2018
Summary of Facts:
Consumer confidence was little changed in August, sitting around its historical average.
Households are upbeat about current conditions but remain a little cautious about the outlook. Disquiet is focused on prospects for the broader economy over the next 12 months rather than households’ own finances, in what is likely an echo of weak business confidence survey results.
Consumer confidence remains about par, according to the ANZ-Roy Morgan Consumer Confidence Index, which was unchanged in August at 118, around the historical average.
The Current Conditions Index fell 1 point to 124 in August, while the Future Conditions Index was unchanged at 114, below its long-run average (122).

Perception slips
Consumers’ perceptions of their current financial situations slipped 2 points, with a net 12% feeling financially better off than a year ago.
A net 26% of consumers expect to be better off financially this time next year, up 1 point.
A net 35% say it is a good time to buy a major household item, down 1 point but still solid.
Perceptions regarding the next year’s economic outlook eased another point to +2%, the lowest reading since October 2015. The five-year outlook also dipped 1 point, to +13%.
Wellington is by far the most confident region at 131 (-1 point). Confidence fell 2 points in Auckland to be in last place at 113.
Housing Prices
Expectations for national house price inflation eased from 3.7% to 3.4% y/y, with the bounce losing steam. The South Island ex-Canterbury is in the lead at 4.8%, while Canterbury is weakest at 2.4%.
General inflation expectations ticked up a smidgen to 4.0% – they have been fairly steady around these levels since taking a step up in March.
Consumer confidence has been relatively steady around average levels in recent months. Perceptions of current conditions remain strong, reflecting a tight labour market. However, there is a degree of caution about the future, more about the economy as a whole than respondents’ own financial situations. This reflects that confidence about the economic outlook is probably something of an echo chamber between households and firms.

Good time for household items
The current level of consumer confidence – and whether respondents think it’s a good time to buy a major household item is still supportive for spending. This level is not a bad compromise between the need to increase household saving, and a more challenging outlook for retail firms who are also dealing with disruption and weak pricing power.
ANZ’s view
Despite consumer confidence holding up, our confidence composite gauge (which combines business expectations and intentions with consumer sentiment) has fallen, due to lower business survey metrics. It’s suggesting a deceleration in GDP growth by year end.

We suspect that the economy may indeed struggle over the second half of the year, as firms defer investment and employment decisions.
The economy is transitioning and some areas of the policy landscape remain uncertain. But the economy still has much going for it – not least of which is a decent fiscal stimulus later this year – and we expect it will muddle through.
(Masthead and Graphs courtesy Supplied by ANZ Bank)

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