ANZ-Roy Morgan NZ Consumer Confidence rose 6 points to 86.5 in May, partially recovering from April lows, though the index remains 21 points below its January peak amid petrol price pressures and war-driven uncertainty.
Summary:
- ANZ-Roy Morgan Consumer Confidence rose 6 points in May to 86.5, but remains 21 points below its January peak, per ANZ Research
- The current conditions index lifted 5 points to 77.2, described by ANZ as remaining very soft, while the future conditions index recovered more strongly from 85.9 to 92.7, per ANZ Research
- Two-year-ahead CPI inflation expectations fell sharply from a record high of 6.6% in April to 5.3% in May, more in line with COVID-era readings, per ANZ Research
- House price inflation expectations eased to 2.6% from 3.2%, with Wellington the most pessimistic region at 1.5% and Canterbury the most optimistic at 3.2%, per ANZ Research
- Perceptions of the 12-month economic outlook improved from a net -48% to -36%, though a net 20% still consider it a bad time to buy a major household item, per ANZ Research
- ANZ Research attributed the confidence lift largely to a small easing in petrol prices, and flagged that Wellington is significantly more downbeat than the rest of the country
New Zealand consumer confidence staged a modest recovery in May but remains deeply depressed, with the latest ANZ-Roy Morgan survey showing a 6-point rise to 86.5 that leaves the index still 21 points below where it stood at the start of the year.
The bounce appears largely tied to a small easing in petrol prices during the month. ANZ Research noted that the correlation between confidence and petrol costs has been particularly striking of late, with the two moving in close tandem as the ongoing US-Iran conflict continues to drive energy price volatility and household budget pressure across New Zealand.
Despite the improvement, the current conditions index, which captures how households feel about their situation right now, rose only 5 points to 77.2, a level ANZ described as very soft. The forward-looking component recovered more meaningfully, rising from 85.9 to 92.7, suggesting households are marginally less pessimistic about the year ahead even as they remain under immediate financial pressure.
The net proportion of households saying they are better off than a year ago improved from -31% to -25%, while those expecting to be better off in twelve months' time rose 9 points to a net 12%. Perceptions of the economic outlook over the coming year improved from a net -48% to -36%, though that reading remains sharply negative by any historical standard.
The best retail indicator in the survey, the net proportion of households saying it is a good time to buy a major household item, rose 5 points to -20, an improvement but still a very weak read. ANZ noted that its May card spend data, due next week, showed discretionary spending taking a clear hit in March and April as households adjusted to higher fuel costs, and the ongoing softness in confidence points to continued caution at the checkout.
One of the more significant shifts in May was a sharp easing in two-year-ahead CPI inflation expectations, which fell from April's record high of 6.6% to 5.3%, a level more consistent with readings from the COVID era. House price inflation expectations also softened, dropping from 3.2% to 2.6%.
A notable regional dimension emerged in the data, with Wellington significantly more downbeat than the rest of the country. Auckland had been the most confident region at the start of the year with Wellington not far behind, but the capital has since dropped well below the national average, a divergence ANZ noted has been a feature of recent years.
ANZ Research said the global oil price outlook remains highly uncertain, with the Middle East conflict clouding the inflation, interest rate and labour market picture for New Zealand households. The bank expects weaker consumption growth this year as lower purchasing power, reduced confidence and higher-than-anticipated unemployment weigh on spending. With headline inflation set to spike and the risk that it may not fall back quickly, ANZ said it expects the Reserve Bank of New Zealand to move the Official Cash Rate back toward a neutral setting of around 3% sooner rather than later, beginning in July, with multiple hikes already largely priced into wholesale interest rates.
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The modest bounce in confidence is unlikely to shift the RBNZ's calculus materially. ANZ's own view is that the central bank will move the Official Cash Rate back to neutral around 3% sooner rather than later, starting in July, with multiple hikes already largely priced into wholesale rates. The easing in two-year inflation expectations from a record 6.6% to 5.3% removes some urgency at the margin, but the current conditions index at 77.2 remains deeply depressed, and the retail spending outlook is poor heading into the ANZ card spend data due next week. Wellington's pronounced regional underperformance adds a public sector demand drag to the picture that is unlikely to reverse quickly.
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