Consumer confidence fell in October amid job security fears against backdrop of interest rate cut flow through lag, ANZ Roy Morgan survey says

Consumer confidence fell in October after three straight months of increases, with job security fears taking a toll, according to the latest ANZ-Roy Morgan Consumer Confidence Survey.

The survey shows consumer confidence fell four points in October to 91.2, with both the current and future conditions indexes declining. Two-year ahead inflation expectations were unchanged at 3.8%. Expected house price inflation year-on-year rose to 3.4% from 3.2%

"Falling interest rates had spurred a cautious recovery in consumer confidence from July, but October marked a sombre return to reality. Interest rate relief won’t be immediate for many households, and there are still plenty of challenges to navigate in the near-term as job security fears add to uncertainty. Given the labour market lags the broader economic cycle by around six months, deteriorating employment conditions are likely to be a headwind well into 2025," ANZ NZ economists Sharon Zollner and Henry Russell say.

"The good news for households is the Reserve Bank has accelerated the pace of [interest rate] easing and is likely to deliver another 50 basis point cut by year end, bringing relief a little closer. Meanwhile, with CPI [consumer price index] inflation back in the [1% to 3%] band and within touching distance of the 2% target midpoint, the inflation challenges of the past few years that have battered consumer confidence are drawing to a close. That adjustment certainly hasn’t been without cost, and those costs will continue to be felt into next year, but brighter times do lie ahead."

Zollner and Russell note interest rate cuts will take time to flow through to mortgage borrowers, with about 65% of mortgage holders set to refix over the next 12 months.

"The wait certainly isn’t without its challenges as labour market conditions continue to deteriorate. The impacts of deteriorating job security are particularly evident in the regional cut of the data. Wellingtonians remain the most pessimistic across the country, with ongoing public sector job losses and the wider fallout from that likely weighing."

The latest Statistics NZ figures showed an unemployment rate of 4.6%, or 143,000, in June, up from 4.4%, or 135,000, in March.

The survey's future conditions index, comprising forward-looking questions, fell to 100.3 from 105.6. The current conditions index also dropped, down two points to 77.6.

Perceptions of current personal financial situations fell six points to -22%. A net 14% expect to be better off this time next year, down 11 points. A net 23% think it’s a bad time to buy a major household item, up two points. Perceptions regarding the economic outlook in 12 months’ time fell two points to -19%, with the five-year-ahead measure down three points to +6%.

A total of 1,002 people were survey. The full survey release is here.