Confidence lifts but consumers ‘hardly gung ho’

Consumer confidence lifted marginally in February, according to ANZ. Photo / Michael Craig

Consumer confidence rose marginally in February, but many households are yet to feel the impact of an improving economy, according to ANZ research.

The ANZ-Roy Morgan Consumer Confidence Index rose 0.6 points to 96.6 in February.

The proportion of households that think it’s a good time to buy a major house item, seen as the best retail indicator, lifted 1 point to -15.

But responses were mixed amongst people with mortgages, and those without, and remains relatively subdued, ANZ said.

“Like businesses, consumers are feeling much more upbeat than six months ago, but they are hardly gung ho,” ANZ chief economist Sharon Zollner said.

“That makes sense, given the unemployment rate is likely yet to top out.”

Zollner said they expect further rate cuts from the Reserve Bank over the coming months – albeit at a slower 25 basis points pace – to cement the recovery under way.

“But for many households it may not feel like things are really improving until the labour market has decisively turned a corner, the housing market is recovering, and broader economic momentum is picking up pace,” she said.

“We think that’s more likely to be a story for the second half of the year.”

Perceptions of current personal financial situations rose 5 points to -12%.

A net 21% expect to be better off this time next year, down 2 points.

Overall, there were only small moves across most components in February’s survey.

Yesterday, the ANZ Business Outlook survey revealed a mixed picture of the prospects for recovery with overall confidence up but companies’ confidence in their own futures taking a hit.

Business confidence rose four points to +58 in February, while expected own activity eased one point to +45.

Zollner said the economy remains on the path to recovery as interest rates fall and our commodity export prices outperform expectations.

Earlier this week, Stats NZ’s retail trade survey showed retail activity rose in the December quarter.

Westpac senior economist Satish Ranchhod said the figures pointed to a firming in households’ discretionary spending appetites.

“That’s consistent with the reduced pressure on households’ finances as inflation and interest rates have fallen, as well as the rise in consumer confidence in recent months,” Ranchhod said.

Ranchhod said he expected spending levels would continue trending higher in 2025 as the full impact of rate cuts was yet to be felt.

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The RBNZ lowered its track for the Official Cash Rate (OCR) earlier this month, effectively signalling more cuts sooner.

The OCR track implied a 25bp cut in both April and May to 3.25%.

It projected a drop to 3.14% by the end of the year and then flatlined at 3.1% out to 2028.

RBNZ cut the OCR by 50bps to 3.75%.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.