ANZ-Roy Morgan New Zealand Consumer Confidence down 6.2pts to 116.4 in July

Consumer confidence fell 6 points in July to 116, below the historical average.

• The Current Conditions Index fell 2 points to remain within its 2019 range, while the Future Conditions Index fell a whopping 9 points to its lowest since September 2015.
• The proportion of households who think it’s a good time to buy a major household item fell 1 point but remains at a respectable level.

The ANZ-Roy Morgan Consumer Confidence Index fell 6 points to 116 in July, its lowest reading for 2019. The Current Conditions Index fell 2 points to 126, while the Future Conditions Index fell 9 points to 110.

Turning to the detail:

• Consumers’ perceptions of their current financial situation fell 3 points to a net 12% feeling financially better off than a year ago.
• A net 21% of consumers expect to be better off financially this time next year, down 8 points.
• A net 39% think it’s a good time to buy a major household item, down 1.
• Perceptions regarding the next year’s economic outlook fell a sharp 13 points to a net 1% expecting conditions to worsen. The five-year outlook fell 6 points to +11%.
• Regional divergence was a key theme, with Wellington confidence up 2 points to 130 but Auckland dropping 10 to 114. The least-confident region is the South Island excluding Canterbury, which fell 10 points to 110.
• Wellington is the region with the strongest house price inflation expectations, up 0.4%pts to 3.3%. Canterbury is the weakest at 1.7%. General inflation expectations fell 0.9%pts to 3.1%.

Consumer confidence fell 6 points in July to sit below its historical average of 120. A deterioration in confidence in future conditions (to 110 and below its average of 121) led the decline, whereas perceptions of current conditions remain at a respectable level (at 126, above its average of 117).

While the current conditions index points to a still-robust household sector, there are a few warning signs that are worth keeping an eye on:

Deteriorating future conditions imply caution among households is on the rise, and that’s likely to be weighing on spending decisions.
Evidence that slowing economic activity is beginning to impact employment growth is mounting, and softening consumer confidence could be reflecting that. Indeed, our July Business Outlook showed a net 6% of firms (and 33% of construction firms) are expecting to cut jobs.
Auckland confidence is sharply lower (largely about future conditions), and is perhaps a decent barometer for pipeline confidence at the national level, given this region led the economic expansion for most of the current cycle.

Despite the slip this month, it’s fair to say that consumer confidence has proven resilient in the face of housing market softness, particularly in Auckland and Christchurch. No doubt lower mortgage rates are supporting. And despite easing slightly in July, the proportion of people still thinking it’s a good time to buy a major household item remains at a high level, which should support spending in the near term. So while positive developments in July’s results are few and far between, most of the bad news remains in the ‘risks’ basket. Labour market developments from here will be key. We’ll get a read on Q2 next week.

Our confidence composite gauge combines business expectations and intentions with overall consumer sentiment to capture both the demand and supply side of the economy and give a better indicator for growth than either series alone.

Looking through the monthly volatility, the composite remains consistent with our expectation that economic growth is finding a floor (figure 2). But downside risks appear heightened, and so far there is little evidence to support our view that growth will begin to gradually recover from the second half of 2019. To be fair, it’s still a bit soon for leading indicators such as our confidence composite to be sending a clear signal on growth momentum in the second half of the year. But as data continues to roll in, the prospects for a sharp acceleration in growth (as per the RBNZ’s May MPS) are looking ever dimmer. We expect the RBNZ to downgrade their outlook at next week’s Monetary Policy Statement.

Click here to download the latest ANZ-Roy Morgan New Zealand Consumer Confidence Release PDF - July 2019.

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Related Research Reports

The latest Roy Morgan Consumer Confidence Monthly Report is available on the Roy Morgan Online Store. It provides demographic breakdowns for Age, Sex, State, Region (Capital Cities/ Country), Generations, Lifecycle, Socio-Economic Scale, Work Status, Occupation, Home Ownership, Voting Intention, Roy Morgan Value Segments and more.

• Consumer Confidence – Monthly Detailed Report in Australia.
• Business Confidence – Monthly Detailed Report in Australia.
• Consumer Banking Satisfaction - Monthly Report in Australia.
• Business Banking Satisfaction - Monthly Report in Australia.

You can also view our monitor of Quarterly New Zealand Unemployment & Under-employment Estimates.

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