Confidence rose by 0.6 points, According to the ANZ-Roy Morgan Consumer Confidence Index, reaching 96.6 for the month. Despite the small uptick, many consumers are still not feeling the full effects of an improving economy.
One of the key indicators for retail activity measures the number of households that believe it’s a good time to purchase a major household item. This index saw a modest rise of 1 point to -15. However, the responses were mixed, with different levels of optimism between people with mortgages and those without. This suggests that confidence remains subdued overall.
ANZ chief economist Sharon Zollner noted that while consumers are more upbeat than they were six months ago, they are far from exuberant. This cautious outlook is understandable, especially considering the unemployment rate has yet to reach its peak. Zollner also anticipates the Reserve Bank of New Zealand will continue to reduce interest rates, albeit at a slower pace of 25 basis points.
Many households may not feel a significant improvement until the labour market shows clearer signs of recovery. Many are also hoping the housing market will stabilise. Zollner believes that these shifts are more likely to occur in the second half of the year.
Perceptions of personal financial situations improved slightly. A 5-point rise to -12 per cent, suggesting that people feel more positive about their financial circumstances. However, expectations for future financial conditions dipped, with a net 21 per cent of respondents anticipating they will be better off a year from now, a 2-point decline from the previous month.
While the consumer confidence survey showed only modest movements across most components, the outlook for businesses was more varied. The ANZ Business Outlook survey revealed a mixed picture. Overall business confidence increased by 4 points to +58 in February, but companies’ confidence in their own future performance dropped slightly.
Despite the mixed results, ANZ economists are confident the economy is on the road to recovery. Falling interest rates and strong performance in commodity exports are expected to support the recovery in the coming months. Furthermore, retail activity data from Stats NZ for the December quarter showed growth. Westpac’s senior economist Satish Ranchhod suggested that reduced financial pressure on households, due to lower inflation and interest rates, is helping boost discretionary spending. He expects this trend to continue into 2025 as the full impact of rate cuts is realised.
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