NZ consumer confidence dips in August, slower house price growth expected

New Zealand consumer confidence dipped in August, with respondents expecting house price growth to slow, particularly in Auckland.

The ANZ-Roy Morgan consumer confidence index slipped to 117.7 last month from 118.2 in July. A net 25% of respondents expect to be better off financially in a year's time, compared to 29% a month earlier. They were slightly more optimistic about their 12-month outlook for the economy, with a net 5% expecting good times ahead, up from 4% in July, while over a five-year horizon a net 10% see more good times, compared to 13%.

The current conditions index gained 1.8 points to 124.3 while the future conditions index decreased 2.1 points to 113.4.

"The economic choreography looks respectable so it's of little surprise to see consumer confidence holding at elevated levels," ANZ Bank New Zealand chief economist Cameron Bagrie said. "Our confidence composite gauge (combining business and consumer sentiment) continues to flag solid-to-strong GDP growth over the coming months. Three to four prcent real GDP growth is on offer. That would mark the sixth year of economic expansion."

The global dairy price recovery is helping mitigate the key risk to the economy of low dairy incomes, Mr Bagrie said, while the strong kiwi dollar is a boon for consumers but a headwind for exporters.

The survey of 1002 people showed a net 37% of respondents think it's a good time to buy a major household item, up one%age point from a month earlier, while inflation expectations rose to 3.4% annual pace from 3.3% in July.

Respondents expect house prices to rise more gradually, with consumers predicting an annual increase of 5% over the next two years, down from 6.1% a month earlier.

ANZ's Bagrie said this fall was largely due to Auckland, where expectations eased from 8.4% to 5.5%.

"While tighter loan-to-value ratio restrictions have yet to be enacted in a formal sense, they are being applied immediately and we may be seeing some early response," Bagrie said. "That said, the fact it was Auckland alone where house price expectations eased up suggests local factors are at play. After surging so far, Auckland's housing market needs to consolidate. Either way, it will be welcome to the Reserve Bank, but whether it is the beginning of the housing boom finale remains to be seen."

(BusinessDesk)