NZ consumer confidence falls in May as low interest rates dull savings, petrol prices rise

Thursday 19th May 2016

New Zealand consumer confidence slid in May amid rising petrol prices and concerns about an accelerating housing market and the impact of lower interest rates on savings.

The ANZ-Roy Morgan consumer confidence index declined to 116.2 from 120 in April. The current conditions index fell by 4 points to 119.3, while the future conditions index decreased by 3 points to 114.3.

"While moving at a marginally slower tempo, New Zealand consumers are still in a good rhythm," ANZ Bank New Zealand chief economist Cameron Bagrie said in his report. "We are left with an impression of consumers in a good mood."

New Zealand's economy is "showing generally good vigour" with gains in house prices and strong employment growth, bolstering incomes and wealth, ANZ said, adding that its combined measure of consumer and business sentiment suggested GDP growth of around 3 percent this year. However the positive sentiment was being tempered by rising petrol prices, and rising tensions over an accelerating property market which hampered first-home buyers and lower interest rates which impacted savers.

Today's survey shows a net 5 percent of the 1,004 respondents said they were better off now than they were a year earlier, down from 8 percent in April, and a net 23 percent see themselves in a better position financially in 12 months' time, down from 28 percent.

A net 6 percent expect better economic conditions in the coming year, down from 9 percent in April, and over a five-year horizon, 13 percent expect more good times than bad times, down from 17 percent in the prior survey.

Respondents were less keen to buy big-ticket items, with a net 34 percent saying now's a good time to buy a major household item compared to 38 percent a month earlier, even as they expected slower price rises, predicting an annual pace of inflation of 3.3 percent over the next two years, compared to 3.5 percent in April.

On house prices, consumers expect an annual increase of 5.8 percent over the next two years, up from 5.3 percent in April.

On a regional basis, Wellington recorded its highest reading for 11 months, whilst Auckland showed the largest fall, declining to its lowest reading since August 2015. The least-confident consumers were in the South Island outside of Canterbury.

BusinessDesk.co.nz

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