Consumer confidence has dipped a little this month after soaring in February, but according to the latest ANZ-Roy Morgan Consumer Confidence Survey, the positive outlook of the previous month is largely intact.
ANZ chief economist Cameron Bagrie said the consumer confidence index fell 6 points to 115 in March. All five of the sub-components in the index recorded a fall. The future conditions index eased 8 points to 117, while current conditions eased 3 points to 112.
"Confidence usually falls in March, as the summer glow wanes and the reality of work reasserts," Bagrie said.
"After accounting for seasonality, March showed a very marginal easing in confidence, but not of a magnitude than could be considered any more than rounding. Considering February showed a solid lift in underlying (seasonality adjusted) confidence, we’re encouraged to see such lifts maintained."
He said consumer confidence continued to be buffeted by an array of forces.
"At one end we have the general feelgood factor percolating from lifts in house prices, and it is no surprise to see Auckland and Christchurch – the two regions showing the most housing froth – top of the pops in regard to consumer confidence.
"Conversely, uncertainty over job prospects urges consumer restraint. Canterbury is the only region showing a sustained lift in employment according to job advertising figures. Eying the general trend in consumer confidence over the past year it appears that, slowly but surely, the optimists (bulls) seem to be gaining the upper hand (hoof)."
However, Bagrie said the still-modest level of consumer confidence continued to signal caution, a natural by-product of cyclical support factors (low interest rates and housing strength) clashing with structural headwinds (fiscal austerity, high debt levels).
He said ANZ's Confidence Composite indicator (which combines the composite measure from the ANZ Business Outlook and seasonally adjusted consumers’ current conditions) was a better guide to economic prospects than either survey alone. This composite indicator is flagging around 2.7 percent growth by mid-year.
"So far so good, but a sustained lift in confidence will ultimately depend on healthier labour market conditions."
Expectations of the level of annual house price increases eased marginally from a 4.1% expectation to 3.8%.
"Auckland and Canterbury remain the centres of expected strength, with anticipated gains of 4.4% and 4% respectively.
"Consumer expectations of overall inflation picked up from 3.2% over the next two years to 3.5%. We don’t use such measures a a bellwether of the level of inflation itself, but rather as signals of potential turning points in regard to wage inflation. We’ve see many such movements before, and until we see successive monthly lifts and signs of a trend, we’ll hold fire on making comment," Bagrie said.
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