Friday 31st August 2018
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Consumer confidence held up in August as households remain relatively upbeat about current conditions but are still cautious about the outlook.
The ANZ Roy Morgan consumer confidence index was at 117.6, virtually unchanged from 118.4 in July with disquiet focused on prospects for the broader economy rather than households' own finances, something ANZ chief economist Sharon Zollner said was "likely an echo of weak business confidence survey results".
The ANZ Business Outlook confidence indicator for August, published yesterday, dropped to another 10-year low, in the same week as Prime Minister Jacinda Ardern sought to address the issue by appointing Air New Zealand chief executive Christopher Luxon to chair a new business advisory group to engage at a high level with the government on economic policy issues.
Zollner said that ANZ's confidence composite gauge (which combines business expectations and intentions with consumer sentiment) has fallen and suggests "a deceleration in GDP growth by year end."
The economy may "indeed struggle" over the second half of the year as firms defer investment and employment decisions, she said.
The current conditions index in this morning's consumer survey eased 1 point to 123.5, above the historical average, while the future conditions index was 113.7 versus 114.1 in July and still below the historical average.
"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," said ANZ chief economist Sharon Zollner.
Of the survey's 1004 respondents, a net 2 percent expected good times financially in the next 12 months, down from 3 percent in July. It was the lowest reading since October 2015. Over the next five years, a net 13 percent predicted continuous good times, down from a net 14 percent in July.
Consumers’ perceptions of their current financial situation fell 2 points, with a net 12 percent of those surveyed reporting they're feeling financially better off than a year ago. However, a net 26 percent expect to be better off in 12 months versus a net 25 percent in July.
General inflation expectations were slightly higher with respondents expecting a 4.0 percent increase per year over the next two years versus 3.9 percent in July. Those surveyed in August expect house prices will rise 3.4 percent per year over the next two years, up from a 3.7 percent annual gain seen in July.
Yesterday's business confidence survey found a net 50 percent of 369 firms surveyed expect general business conditions to deteriorate in the coming 12 months, 5 points lower than July's result which was itself a 10-year low.
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