Kiwi confidence is rising again - but so are inflation expectations.
The latest monthly ANZ-Roy Morgan Consumer Confidence Survey shows that overall confidence of survey respondents has risen - after falling in March.
ANZ chief economist Sharon Zollner said this is has shored up an upward trend in the survey "that was starting to look wobbly".
However, expectations for inflation in two years' time rose to 4.7% from 4.2% last month (which was also a rise on the previous month).
Zollner said this was the highest reading for inflation expectations since July 2023.
"It may be related to global tariff talk, but since New Zealand is not putting on new tariffs, global developments are unlikely to be inflationary here," she said.
"...Our take is that the tariffs will actually result in lower inflation in New Zealand, primarily due to weaker global growth (though how the NZD reacts will matter a lot too)."
But Zollner was surprised by the magnitude of the rise in inflation expectations.
"Household inflation expectations matter less for the inflation outlook than the expectations of those who actually directly set prices. But all else equal, when households are expecting high inflation, that can boost wage demands and make it easier than otherwise for firms to raise their prices," she said.
One thing that didn't rise was house price rise expectations, which remained at 3.4%, having dropped from a recent peak of 3.9% in the December survey.
Other details in the latest survey results included:
- The future conditions index made up of forward-looking questions rose 4 points to 105.2. The current conditions index lifted 6 points to 88.0.
- Perceptions of current personal financial situations rose 8 points to -13%.
- A net 23% expect to be better off this time next year, up 7 points.
- A net 11% think it’s a bad time to buy a major household item. While it did improve, it’s still a long way from suggesting good times for the retail sector.
- Perceptions regarding the economic outlook in 12 months’ time rose 4 points to -16%. The 5-year-ahead measure rose from 6% to 9%.
"It’s good to see that New Zealand consumers so far appear to be relatively unfazed by the recent bout of global volatility," Zollner said.
"The economy is turning higher (albeit slowly), and interest rates are lower. In the bigger picture, though, consumer confidence remains subdued, and this is dampening the outlook for the retail sector.
"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," Zollner said.
Last week the ANZ economists said they now expected two more cuts to the Official Cash Rate than previously. The OCR is currently at 3.5% and the ANZ economists now think it will be dropped to 2.5% by later this year.
Zollner said households with significant debt "would be very glad to see" additional OCR cuts.
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