New Zealand Consumer Confidence Surges in July, ANZ-Roy Morgan Index Hits 99.3

New Zealand consumer confidence saw a sharp rebound in July, with the ANZ-Roy Morgan Consumer Confidence index climbing to 99.3 from 91.3 in the previous month. The 8-point jump signals a notable improvement in household sentiment, moving the index closer to the neutral 100-point threshold that separates optimism from pessimism.

What drove the July surge?

The increase was broad-based, with all five sub-indices of the survey recording gains. The largest improvement was in perceptions of current economic conditions, which rose 12 points to -5. Households also reported a more favorable view of their own financial situations compared to a year ago, with that sub-index rising 9 points to -6. Forward-looking components, including expectations for the economy in 12 months, also strengthened, climbing 10 points to +12.

The survey, conducted between July 1 and July 25, reflects a period of easing inflation pressures and growing expectations that the Reserve Bank of New Zealand (RBNZ) may begin cutting interest rates sooner than previously anticipated. Market analysts have pointed to softer-than-expected consumer price data and a cooling labor market as key factors behind the shift in sentiment.

Implications for the New Zealand economy

Consumer confidence is a closely watched leading indicator for household spending, which accounts for roughly 60% of New Zealand’s GDP. A sustained improvement in confidence could support retail sales and broader economic activity in the second half of 2024. However, at 99.3, the index remains below its long-term average of around 112, indicating that households remain cautious despite the recent uplift.

Economists at ANZ noted that while the improvement is encouraging, the data still points to a subdued consumer outlook. ‘The recovery in confidence is welcome, but it is from a very low base,’ the bank said in its report. ‘Households are still grappling with high mortgage costs and a weak housing market, which will likely cap the pace of any recovery in spending.’

What this means for interest rate expectations

The confidence data adds to a growing narrative that the RBNZ may be able to ease monetary policy sooner than its current projections suggest. Financial markets are now pricing in a higher probability of a rate cut in late 2024, though the central bank has maintained a hawkish stance, warning that domestic inflation pressures remain persistent. The next RBNZ monetary policy decision is scheduled for August 14, and the July confidence data will be among the key inputs considered by the board.

Conclusion

The July ANZ-Roy Morgan Consumer Confidence survey provides the clearest signal yet that New Zealand households are beginning to feel more optimistic about the economic outlook. While the index remains below its neutral level, the magnitude of the monthly increase suggests that the worst of the downturn in sentiment may have passed. The coming months will be critical in determining whether this improvement translates into a sustained recovery in consumer spending and broader economic growth.

FAQs

Q1: What is the ANZ-Roy Morgan Consumer Confidence index?
The ANZ-Roy Morgan Consumer Confidence index is a monthly survey of approximately 1,000 New Zealanders that measures household sentiment on current and future economic conditions, personal finances, and spending intentions. A reading above 100 indicates optimism, while below 100 signals pessimism.

Q2: Why did consumer confidence rise in July 2024?
The rise was driven by improving perceptions of current economic conditions and personal finances, likely linked to easing inflation and growing expectations of future interest rate cuts by the Reserve Bank of New Zealand.

Q3: Is a reading of 99.3 considered strong?
No, a reading of 99.3 is still slightly below the neutral 100 level and well below the long-term average of around 112. It indicates that while sentiment has improved, households remain cautious overall.