Consumer Sentiment Depressed, Price Expectations Need To Be Lower

MNIThe ANZ Roy Morgan measure of consumer confidence fell 7 points to its lowest since the series began as consumers were spooked not only by the RBNZ’s outsized 75bp hike in November but also its talk of recession. But the RBNZ will need to see actual spending slow and a further moderation in inflation expectations to pause.

• ANZ notes that New Zealanders have been sounding a lot more depressed than their spending has actually indicated. But that is likely to change in 2023, as more households refinance their mortgages at higher rates, house prices fall further and unemployment begins to rise. The economic outlook for a year ahead deteriorated sharply to -54% from -41% and a net 10% think they’ll be worse off this time next year (down 10pp).
• Consumer inflation expectations fell in December to 5.2% from 5.3% but they remain too high and need to come down further. Expectations at this level could push wages higher given the NZ labour market is at capacity and makes second-round effects more likely.
• House price inflation expectations fell to -0.8% from 0.0%, a new low.
• The balance of people who believe it is a good time to buy a major household item fell to -33% from -31%. For mortgage holders it was -39% compared with -26% for renters.

Source: MNI - Market News/Refinitiv/ANZ Roy Morgan