Will NZ households pay extra for consumer items amid growing inflationary burden?

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Will NZ households pay extra for consumer items amid growing inflationary burden?

 Will NZ households pay extra for consumer items amid growing inflationary burden?
Image source: CrizzyStudio, Shutterstock

Summary

  • ANZ-Roy Morgan Consumer Confidence Index remained steady at 114 in June.
  • The index measures consumer confidence in NZ households every month and the subsequent impact on buying patterns.
  • Inflationary pressures are building up.

ANZ-Roy Morgan Consumer Confidence Index stayed flat at 114 in June as compared to previous month, a little below its historical average of 120. A reading above 100 implies more optimists than pessimists.

However, perceptions on the current financial situation have been the strongest since post-coronavirus times.

ANZ- Roy Morgan Consumer Confidence is a monthly indicator of consumer confidence in New Zealand households, revealing how this influences their purchasing habits.

 Source: © Rawpixelimages | Megapixl.com

ANZ Chief Economist Sharon Zollner stated that households' confidence in purchasing major items was increasing, not that earlier self-reported caution was much of a barrier in practice as per retail data statistics. This most likely shows a preference for nice things over international vacations, as well as the property bubble.

ALSO READ: Opinion: How Does The Reserve Bank Plan To Balance High Inflation and Low Interest Rates?

Below are some of the details that the index revealed:

  • Perceptions of present financial conditions increased by 7 points to +14%
  • A net 22% anticipate to be better off this time for 2022, down by 5 points 
  • A net 22% of people believe this is an excellent time to buy a big home item, up by 3 points,
  • Perceptions regarding next year’s economic outlook increased 4 points to +3% while the 5-year outlook perceptions fell 8 points to +10%.

Inflation expectations ahead

Consumer inflation expectations increased by 0.7 percentage points to 5.1% in June, the highest result in the 11-year history of the survey. While house price expectations remained a bit unchanged at 5.8%, they witnessed a rise in Auckland but eased in other regions.

ALSO READ: New dwellings consent reaches a new annual record in May 2021

DO READ: The housing crisis in New Zealand takes a new turn

Household inflation expectations, according to Zollner, are generally far greater than what corporations predicted, and are very volatile. However, that does not negate the fact that they are important, she added.             

DO READ: New Zealand stares at higher inflation, ANZ calls for increase in OCR this year

Higher consumer inflation expectations allow businesses to boost prices without the danger of customer reaction, and they can also influence wage demands if the labour market is tight, which is also the present condition. The time period till which business inflation forecasts will remain high will be a significant question, as per Zollner. However, the evidence clearly shows that inflation risks are now skewed to one side.

Capacity restrictions in the economy, such as labour shortages, supply chain interruptions, and rising power costs, contributed to inflationary pressures.

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