Confidence wobbles but consumers still eyeing big-ticket items

Although optimism has eased a little it is well above recent lows. Photo / Dean Purcell

Consumer sentiment eased in December but remains well above its recent lows, according to the latest ANZ-Roy Morgan Consumer Confidence Index.

Following a six-month high in November, the index has fallen 4 points this month to 118.7, in line with the historical average. Current expectations held firm but consumers were less certain about the future.

"Consumer confidence put its feet up in December after making solid gains through the second half of the year," said ANZ chief economist Cameron Bagrie.

While confidence wobbles around from month to month, what matters is the level, which remains respectable, he said.

The widespread fall in confidence was greatest in regional South Island.

Expectations for the economy for one year ahead fell 9 points to +6 which is in line with its historical average. Expectations to five years ahead fell five points to +17 which is slightly below the historical average.

When combined with business confidence, the overall confidence composite still points to respectable prospects for the economy heading into next year, Bagrie said.

A net 6 per cent of respondents feel financially better off than a year ago, down 3 points, while expectations 12 months ahead declined by a similar amount to a still positive +26.

There's good news for retailers, with a net 38 per cent believing it's a good time to buy a major household item which is a six-month high.

"Softer future expectations suggest consumers aren't getting ahead of themselves just yet. To a degree this is encouraging; borrow-and-spend style growth can only take us so far - just like the Christmas presents you buy on your credit card, you have to pay it back," Bagrie said.

The reasonable consumer confidence and business sentiment signalled respectable rather than stellar growth over the months ahead, he said.

Inflation expectations fell back to 3.1 per cent, reversing last month's increases, while house price growth expectation bounced to 4.9 per cent and unwound last month's fall.

Despite indications the heated Auckland market is slowing, expectations of Auckland house price growth surged to 6.5 per cent - a four-month high - while falling in most other regions.

Bagrie said consumers feeling a little more cautious shouldn't necessarily be seen as a bad thing. A key theme driving housing activity, in particular, has been a return to the borrow-and-spend style growth with household credit again running ahead of incomes.

Moods

• Index falls 4 points to 118.7 - in line with historical average.

• Net 6% feel financially better off than a year ago.

• Net 38% think it's a good time to buy a major household item.