New research shows that the environment for retailers across New Zealand is “likely to remain patchy and challenging for some time yet”, which comes as no surprise according to local peak body Retail NZ.
The latest ANZ-Roy Morgan NZ Consumer Confidence Index shows that consumer confidence fell 4 points to 96.0 in January. This followed a recent lift of 0.4 percentage points to 100.2.
According to ANZ Bank and Roy Morgan, the proportion of households thinking it’s a good time to buy a major household item – “the best retail indicator” – dropped a sharp 15 points to negative 16.
“The indicator is well off its lows and likely still trending higher, but this month’s fall is a reminder that the environment for retailers is likely to remain patchy and challenging for some time yet,” the research report read.
Meanwhile, inflation expectations were little changed at 3.9 per cent, which have been very stable in recent months.
“Household inflation expectations have been very stable recently, but recent increases in petrol prices do highlight the risk that they start to rise again or at least bottom out for a period at rates significantly higher than pre-COVID,” the report continued.
“Statistical analysis shows that petrol prices have an outsized impact on household inflation expectations relative to their share of spend.
“Like businesses, consumers are feeling much more upbeat than six months ago, but there has been some slippage as reality bites. The economy is typically a slow ship to turn.
“It has turned in a more positive cyclical direction, but continues to navigate choppy seas. We expect a 50bp cut from the RBNZ next month to put a little more wind in the sails.”
Retail NZ CEO Carolyn Young said that the consumer confidence results reflect the realities that retailers are dealing with.
“While retailers saw some benefit from the customary Christmas rush and the Boxing Day sales, consumers are continuing to be careful with their spending,” Young said.
“Attitudes to buying major household items rose sharply in December and the latest figure signals a return to previous levels. This may be cyclical, due to the sales and great deals that were available around Christmas and Boxing Day.”
Pricing and cost pressures will continue to be major challenges for retailers this year, with Young adding that the sector is looking forward to seeing a lift in consumer spending as the impact of the fall in interest rates kicks in, as well as benefits from the Government’s new focus on economic growth.
The ANZ Business Outlook for January, released yesterday, found that the retail sector was one of the most positive sectors about expected performance over the next 12 months.
“Retailers can see that things are set to improve and the sooner that happens, the better.”