Consumer confidence bounced back from recessionary lows in July, ANZ-Roy Morgan’s survey shows. 

“It’s still very low, but has clawed back about half the March-April fall that coincided with ‘recession’ headlines. The lift was driven by improving expectations rather than the here and now,” ANZ chief economist Sharon Zollner said. 

Consumer confidence rose 5 points in July. 

The future conditions index, made up of forward-looking questions, rose 9 points from 87.0 to 95.7, in contrast to the current conditions index, which fell a point to 76.2. 

Perceptions of current personal financial situations rebounded 4 points to -18%. A net 20% expect to be better off this time next year, up 12 points. 

Perceptions regarding the economic outlook in 12 months’ time lifted 7 points to -32%. The 5-year-ahead measure rose 7 points to -1%. 

“The Kiwi consumer clearly remains in a very cautious mood. With unemployment rising and the cost of living still biting, that’s not surprising. Prospects for wealth gains from house prices are also dissipating,” Zollner said. 

“The here and now is tough going for many, and nice-to-haves are increasingly being done without. 

“But the light at the end of the tunnel is getting a little brighter. The last month has brought a decent fall in CPI inflation, a general expectation that the RBNZ will cut the Official Cash Rate earlier than previously expected, and even drops in fixed mortgage rates. 

“There’s a hint in this month’s survey that consumers are perhaps starting to feel a little optimism that the worst will soon be past.” 

The survey reflected the tough retail environment this winter, Zollner said. 

A net 30% of respondents thought it was bad time to buy a major household item, this retail spending indicator giving up last month’s gains. 

“Consumer confidence plummeted when inflation took off, then was recovering as inflation fell until recent months,” she said. 

“The rolling over of this indicator is consistent with our card spending data that indicates a very tough autumn and winter for retailers.” 

House price inflation expectations also fell from 3.4% to 2.4% y/y. Expectations fell in every region. Auckland is highest, at 2.9%. 

Inflation expectations continued to trend lower. 

“Over this inflation cycle, household expectations have led CPI inflation by around six months, and the recent data is consistent with our expectation that inflation will all be back into the 1-3% target band in the next print,” Zollner said. 

“After being more positive than the rest of the country over 2019-2022, Wellington consumers are now considerably more pessimistic, and didn’t take part in the bounce this month. 

“Public sector job cuts are biting, one suspects.” 

Two-year-ahead CPI inflation expectations eased from 4.2% to 3.7% and continue to trend lower in a zig-zag fashion, consistent with annual inflation continuing to fall over the next six months. 

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.