Consumer confidence back on the up but so are inflation expectations – ANZ survey

The Mānawa Bay shopping centre. The retail sector outlook remains subdued. Photo / Michael Craig

• Consumer confidence rose 5 points to 98.3 in April, according to the ANZ-Roy Morgan survey.
• Inflation expectations increased 0.5 points to 4.7%, the highest since July 2023, ANZ chief economist Sharon Zollner said.
• Consumers’ perceptions of their financial situations improved, but retail sector outlook remains subdued.

Consumer confidence rose five points to 98.3 in April, according to the latest ANZ-Roy Morgan survey, shoring up the upward trend that was starting to look wobbly.

But inflation expectations also rose sharply – up 0.5 points to 4.7%, the highest reading since July 2023.

“Household inflation expectations soared in April, surprisingly,” said ANZ chief economist Sharon Zollner.

“Household inflation expectations matter less for the inflation outlook than the expectations of those who actually directly set prices.

“But all else [being] equal, when households are expecting high inflation, that can boost wage demands and make it easier than otherwise for firms to raise their prices.”

The jump could have been due to the impact of talk about global tariffs being inflationary, Zollner said.

“New Zealand is not imposing any new tariffs, however, and our take is that the tariffs will actually result in lower inflation in New Zealand, primarily due to weaker global growth.”

Zollner said it was good to see that New Zealand consumers appeared to be relatively unfazed by the recent bout of global volatility.

“The economy is turning higher, albeit slowly, and interest rates are lower.”

In the bigger picture, though, consumer confidence remained subdued and this was dampening the outlook for the retail sector, Zollner said.

“We’ve recently revised down our forecasts for growth on an assumption that firms will be less willing to take risks with global dark clouds hovering.

“But the silver lining for consumers is that we have also added two more 25bp [bps or basis point] cuts to the Official Cash Rate into our forecasts in order to offset that, which households with significant debt would be very glad to see.”

Consumers’ perceptions of their current personal financial situations rose eight points to -13%.

A net 23% expected to be better off this time next year, up seven points.

A net 11% think it’s a bad time to buy a major household item.

While that was an improvement, it was “still a long way from suggesting good times for the retail sector”, Zollner said.

Perceptions regarding the economic outlook in 12 months’ time rose four points to -16%.

The five-year-ahead measure rose from 6% to 9%. House price inflation expectations were steady at 3.4% year on year.

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.