Real house prices could drop over the next two years, although there would be a limited decline, while households remain cautious toward spending and their perception of how the economy is evolving, according to the latest ANZ-Roy Morgan Consumer Confidence Index.
The index fell eight points to 108.2 in February, and has been on a declining trend since early 2010, it said in a release accompanying the index. However, seasonal adjustment showed confidence only fell one point, pointing to little change in households' already cautious outlook.
General inflation expectations lifted in February to 4.1% per annum over the next two years, from 3.9% in January.
"This has been trending up since October. While such measures are generally a poor bellwether for inflation itself, they do provide some value in terms of wage bargaining expectations, an area we will watch with interest," it said in the release.
Meanwhile house prices are expected to rise 1.8% per year on average over the next two years, down from 2.1% in January.
"Such measures typically have a positive bias and we view the measure as flagging limited movement and declines in real house prices," it said in the release.
Here is the release from ANZ Nationa and Roy Morgan:
The ANZ-Roy Morgan Consumer Confidence measure dropped nine points to 108.2 in February. The index has been on a declining trend since early 2010.
Turning to components, the Current Conditions index fell nine points to 96.6 (previously 105.2). This reverses the lift seen in January and takes the index back below the key 100 threshold. Leading the fall in current sentiment was a drop in the perception of whether it is a good time to buy a major household item (from +20 to +13) and more negative perceptions by respondents regarding their current financial position relative to a year ago. A net 20 percent of consumers still feel worse off relative to last year, compared to a net 9 percent in January.
The Future Expectations component fell from 125.0 to 115.9. This was underpinned by declines in perception regarding financial wellbeing and economic prospects over the coming year.
While the decline in the month appears discouraging, seasonal factors account for the drop in sentiment. If we remove the seasonal factor apparent in consumer confidence, headline confidence was down only a point and the current conditions component was unchanged at 94.8. All the five subcomponent questions were largely unchanged on January once seasonal influences are removed.
Hence, the overall message is unchanged: households remain cautious towards spending and how they perceive the economy is evolving, though more upbeat than the dark days of 2008.
Looking at the detail, there was a considerably larger drop in the confidence of males than females. Male confidence fell 14 points to 109.6, while female confidence slipped only 3 points to 106.7. Females are more confident about the current economic environment than their male counterparts. Males, however, are more confident about perceived future economic conditions.
Confidence eased for most of the age cohorts, with the 18-24 age cohort registering the largest loss in confidence, dropping 16 points to 117.3 This deterioration in sentiment was reflected over both the current and future conditions measures.
Confidence was weaker across every region. Wellington had the smallest reduction in confidence (down 4 points to 116.8) and remains the most confident locality. The South Island recorded a large fall in current conditions, dropping 21 points to 88.4. This was primarily due to a drop in current conditions in Canterbury, which slipped 12 points to a twelve month low of 91.5.The North Island recorded a larger fall in future conditions, dropping 11 points to 115.0.
General inflation expectations lifted, while house price expectations dropped. Households expect general inflation to average 4.1 percent per annum over the next two years (up from 3.9 percent in January). This has been trending up since October. While such measures are generally a poor bellwether for inflation itself, they do provide some value in terms of wage bargaining expectations, an area we will watch with interest. House prices are expected to rise 1.8 percent per year on average over the next 2 years, down from January’s 2.1 percent. Such measures typically have a positive bias and we view the measure as flagging limited movement and declines in real house prices.
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