1 Dec 2023

Consumer confidence remains pessimistic as inflation pressures persist

3:54 pm on 1 December 2023
Christmas shopping in Wellington.

A quarter of respondents to ANZ's November consumer survey said now was not a good time to buy a big ticket item. Photo: RNZ / Rebekah Parsons-King

Consumer confidence has improved but remains pessimistic as household budgets stay squeezed, deterring people from big spending.

ANZ's November consumer survey showed sentiment rising four points to 91 - readings below 100 are regarded as pessimism.

The number reporting they were now better off financially rose slightly, but so did the number expecting the economy to be worse off in a year's time.

A quarter of respondents said now was not a good time to buy a big ticket item, an indicator of future retail trends, but an improvement on the previous survey.

ANZ senior economist Miles Workman said the survey, like a companion business confidence survey, was a mixed bag but overall suggested people felt the worst of the downturn might be over.

"Those paying off a mortgage continue to be more cautious about spending than those who are not, but the gap is closing. This might be related to rising expectations for house price inflation."

Overall inflation expectations edged up to 4.6 percent, a three-month high which Workman said would have the Reserve Bank (RBNZ) wary because it still wanted to see expectations falling.

"Good news is currently conditional: it's only good news so long as the RBNZ remains confident that inflation will keep on falling back to target."

He said households might be buoyed by the prospect of income tax cuts and other support measures from the new government, but that too would add to RBNZ caution about the stimulus it might give to spending and inflation.

"For the RBNZ, it'll be important to weigh any tax-related bump in consumer demand against an outlook for lower government spending ... before assessing the potential impacts on the inflation outlook."

The RBNZ held its cash rate steady this week but surprised with a warning that further rate rises might still be needed if inflation does not fall quickly enough.

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