New Zealand Consumer Confidence Rises to 99.3 in July

New Zealand consumers exhibited a notable recovery in confidence in July, with the ANZ-Roy Morgan index rising by 8 points to 99.3. This marks the third consecutive monthly increase, moving away from the April low of 80.3. Despite this improvement, the index remains 8 points below the January peak and still below the neutral line of 100.

The increase was largely driven by a significant rise in future economic conditions, which surged to 106.5 from 96.7, marking the first reading above neutral since February. Current conditions also improved, rising 5.3 points to 88.5, indicating progress but not a robust recovery.

Key details from the survey include:

• Households reporting they are worse off than a year ago improved to a net -16% from -23%, the best reading since March.
• A net 21% of respondents expect to be better off next year, up 11 points and the strongest sentiment since January.
• The 12-month economic outlook improved to -13% from -23%, while the five-year outlook rose 9 points to +12%.
• A net 7% still view it as a bad time to make significant purchases, an increase of 4 points but still in negative territory.
• Two-year inflation expectations remained unchanged at 4.6%.
• House price expectations decreased slightly to 2.6% from 3.0%.

The unchanged inflation expectations are noteworthy, particularly following the Reserve Bank of New Zealand's (RBNZ) decision to initiate a new tightening cycle with a 25 basis point hike in the official cash rate on July 8. Despite this hike, consumer expectations for inflation remained steady, indicating that households are not significantly reacting to the central bank's actions.

The weekly breakdown of the index revealed a spike in confidence above 105 in the first half of July, which then declined sharply in the final week as oil prices began to rise. This fluctuation suggests that consumer sentiment may be sensitive to external economic factors, particularly fuel prices.

Housing market expectations continue to lag, with current projections for house price inflation halving from previous years' levels. At 2.6%, these expectations are barely sufficient to encourage consumer spending in the housing market.

In conclusion, while the rise in consumer confidence is a positive sign for the New Zealand economy, the impact of rising oil prices and stagnant inflation expectations could pose challenges in future reports.