Consumer confidence jumps to a five month high while shoppers keep their wallets shut

Household confidence has come back faster than almost anyone expected. The ANZ-Roy Morgan Consumer Confidence Index lifted 8 points in July to 99.3, its best reading in five months and a long way back from the low it hit in April. The survey was released on Friday, a day after a business confidence survey from the same bank showed firms turning sharply more optimistic as well.

The number still sits just under 100, which is the line ANZ uses to separate net optimism from net pessimism, so it is more accurate to say households have stopped feeling grim than to say they feel good. But the direction has changed. The index is now 19 points above its April low, although it remains 8 points below the peak it reached in January.

What moved most was how people feel about the future rather than how they feel about right now. The forward looking part of the survey rose 9.8 points to 106.5, the first time it has been above 100 since February. The current conditions measure rose 5.3 points to 88.5, which is an improvement but still firmly negative. In other words, New Zealanders are not enjoying this year. They have simply decided next year might be better.

The personal finance numbers tell the same story. A net 16 percent of households say they are worse off than they were a year ago, an improvement from a net 23 percent in June and the strongest reading since March. Looking ahead, a net 10 percent expect to be better off in a year, a swing of 11 points in a single month. Views on the wider economy improved sharply too, with the net share expecting bad times over the next 12 months narrowing from 23 percent to 13 percent, and the five year outlook strengthening 9 points to a net 12 percent positive.

The catch is the one question that matters most to anyone running a shop. Asked whether now is a good time to buy a major household item, the answer was still no. That measure improved from a net minus 11 to a net minus 7, which leaves it in negative territory where it has sat for months. People are feeling better without yet acting on it.

ANZ chief economist Sharon Zollner put the uncertainty at the centre of her commentary. “Developments in the Middle East will continue to buffet both business and consumer confidence as long as the situation remains volatile,” she said. The survey itself showed that effect in miniature, with responses collected later in the month weaker than those collected early. Zollner and ANZ economist Matt Dilly wrote that “a sharp bounce in consumer confidence this month is very welcome, but it was unsurprising to see confidence ease again late in the month”.

For retailers, Zollner framed the question plainly. “The question for retailers is whether people adapt to the uncertainty and to some extent lose interest, or whether it will cause a persistent hit to spending above and beyond the cashflow impact of more expensive fuel prices,” she said.

Recent hard data suggests the second option is winning so far. Stats NZ electronic card transactions for June, published on 15 July, showed retail spending fell 1.4 percent on May, a drop of about $98 million, with core retail down 1.5 percent. Annual growth in card spending eased to 1.3 percent from 3.3 percent the month before. The weakness was spread across the categories that move with confidence, with durables down 3.9 percent, apparel down 2.2 percent and hospitality down 1.9 percent. Cardholders still put $9.1 billion through the machines across 166 million transactions, at an average of $55 a go, but the trend was down.

That gap between mood and money is the thing worth watching over the next two months. Confidence surveys move first and spending follows, or it does not. Businesses appear to be betting that it will. ANZ’s Business Outlook survey, released on Thursday, showed headline confidence jumping 19 points to 56 and firms’ expectations for their own activity rising 12 points to 49. Employment intentions nearly doubled from 9.4 to 18.1 and investment intentions rose from 16.5 to 22.8. Both the confidence and own activity readings were the highest since the Iran conflict began.

Zollner’s line on the volatility in the business survey was blunt. “It feels like we need a weekly business confidence survey at the moment,” she said.

Inflation is the reason none of this is straightforward. Households still expect prices to rise 4.6 percent over the next two years, unchanged on June and well above what the Reserve Bank is aiming for. Firms are more relaxed, with their inflation expectations easing from 3.36 percent to 3.14 percent and cost expectations falling, though a net 47 percent still plan to lift their prices in the next three months.

The Reserve Bank has already started acting on that. On 8 July it raised the Official Cash Rate 25 basis points to 2.50 percent, the first increase since May 2023, with annual inflation thought to have peaked at 3.9 percent in the June quarter. Economists expect further rises at a gradual pace through the rest of the year. Rising mortgage rates are an odd companion to rising confidence, and they are one reason the willingness to buy big ticket items has not followed the mood.

Housing is caught in the same crosscurrent. Consumers now expect house prices to rise 2.6 percent a year, down from earlier in the year, while ANZ economists said this week they still forecast a 2 percent fall in prices across 2026 before a modest recovery in 2027. Their report noted that “investors in particular appear to have pulled back this year”, with buyers weighing possible capital gains tax and interest deductibility changes ahead of November’s election.

The next test comes with July card spending figures in mid August, which will be the first read on whether the improved mood has reached the checkout. A confidence index that climbs while spending falls is a familiar pattern in New Zealand, and it usually resolves one way or the other within a couple of months. Either households start replacing the appliance they have been nursing along, or the optimism quietly drains away again the next time petrol prices move.

Are you feeling better off than you were a year ago, and has that changed what you are prepared to spend? Tell us in the comments below.

This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂