NZ: Consumer sentiment lifted in September - ANZ

Cameron Bagrie, Chief Economist at ANZ, notes that the NZ’s ANZ-Roy Morgan Consumer Confidence Index increased from 117.7 to 121.0.

Key Quotes

“Our seasonally adjusted estimate also showed a rise of 3 points, lifting from 122 to 125, which is the fourth consecutive increase and the highest reading since January. There is therefore more blush to the increase than spring pollination alone.

The movers in this month’s survey relate to expectations about the future. The Current Conditions Index was largely unchanged (from 124.3 to 124.1), while the Future Conditions Index rose from 113.4 to 119.0.

• Forward-looking indicators bloomed. A net 31% expect to be better off financially in 12 months’ time, up 6 points on the month prior. Net optimism regarding the short-term economic outlook lifted from +5 to +12. Confidence regarding the long-term economic outlook increased from +10 to +14.
• Concurrent spending indicators were largely unchanged and continue to flag solid spending prospects ahead. A net 11% feel better off compared to a year ago, which is unchanged on last month’s reading. Consumers’ enthusiasm to buy a major household item continues to thrive, at a net 38%.

The economy continues to bear fruit so it’s of little surprise to see consumer confidence growing. Annual GDP growth has accelerated to 3.6% and the unemployment rate has fallen to 5.1%. House prices have a rosy tint and dairy prices are coming into bud. There are still cash-flow pressures in dairying but less negative is an improvement. While a strong NZD may be a negative for exporters, it’s propagating cheaper prices for consumers.

Our confidence composite gauge (which combines business and consumer sentiment into one gauge) continues to flag a solid-to-strong pace of GDP growth over the coming months. Four percent real GDP growth is in prospect. At that pace, the economy will eat into spare resources. Skill shortages will become an increasing challenge for businesses. But that is a better problem to have than insufficient sales and it should push wages higher, another positive for consumers.

House price expectations hit a new high of 6.3%. Last month’s moderation in house expectations in Auckland was short-lived. The bungy-cord remains attached, with expectations moving from 8.4% in July, to 5.5% in August, and back up to 7.1% in September. House price expectations in Canterbury – languishing somewhat of late compared to the rest of the country – are showing more signs sprouting too, rising from 3.7% to 6.0%. Inflation expectations nudged a tad higher from 3.4% to 3.6%.

Higher house prices aren’t a win for all. Confidence in the 25-34 year bracket (first home buyer heartland) continues to see-saw: as house price expectations rise, their confidence in current conditions falls and vice versa.”