NZ consumer confidence held steady in May in 'Goldilocks range'

Consumer confidence has been broadly steady in recent years. Photo: Lynn Grieveson

New Zealand consumer confidence held steady in May at levels slightly above the historical average.

The ANZ Roy Morgan consumer confidence index edged up to 121 in May from 120.5 in April. The current conditions index lifted to 124.6 from 123.1 while the future conditions index was largely unchanged at 118.5 from 118.7.

"Both the current and future conditions indexes were little changed. Consumers are feeling neither exuberant nor alarmed," said Sharon Zollner, chief economist at ANZ Bank New Zealand. "Households are feeling pretty good due to a strong labour market and still low interest rates, but are not gung ho. In our view the household saving rate needs to lift from here, so middle-of-the-road confidence is not a bad thing.

"Consumer confidence has been broadly steady in recent years at respectable levels – in what is probably the Goldilocks range."

Of the survey's 998 respondents, a net 12 percent saw good economic times in the coming 12 months, easing from 13 percent in April and remaining around its December low. The five-year outlook dipped one point, with a net 17 percent seeing good times ahead, the lowest level since May 2017. A net 13 percent of respondents felt they and their families were better off financially than this time last year, from net 9 percent in April, and a net 27 percent expect to be better off financially a year from now, up from 25 percent.

Zollner said confidence fell 5 points in Auckland, which is now the least confident region, with the rest of the North Island also relatively subdued. South Island confidence rebounded strongly, and Wellington confidence is high, she said.

A net 36 percent of those surveyed said it was a good time to buy a major household item, from 37 percent in April, which ANZ said remains at a strong level and should support durables spending.

Respondents expected national house prices to rise 3.7 percent per year over the next two years, down from 4.1 percent in April. Expectations remain strongest amongst Wellingtonians at 4.3 percent. Annual inflation expectations were all but unchanged at 3.9 percent from 4 percent.

This survey follows ANZ's gauge of business confidence released yesterday which showed that a net 27 percent of 354 firms surveyed expect general business conditions to deteriorate in the coming 12 months, compared to a net 23 percent pessimists in April.

Zollner said ANZ's confidence composite gauge, which combines business and consumer sentiment, suggests GDP growth of about 2 percent.

"High household debt and capacity constraints are perhaps making themselves felt, but still-low interest rates, population growth, the strong terms of trade and fiscal stimulus are providing support," she said.