A new reading on business confidence, due next week, is unlikely to show any change from a falling trend.
ANZ chief economist Sharon Zollner says the confidence composite gauge – based on business expectations and consumer sentiment – is on a “downward trajectory” and still suggesting 2% GDP growth.
This is well below official projections by the Treasury and the Reserve Bank of 3%, which was again challenged this week by the drop in migration figures for June.
The ANZ Roy Morgan consumer confidence index slipped a further two points to 118 in July but rose one point to 121 on a seasonally adjusted basis (confidence usually falls in winter).
This is in line with long-run averages and contains positive news in consumers’ perceptions of their own financial situations. This is up three points, with a net 14% feeling financially better off than a year ago.
Looking forward, a net 25% of consumers expect to be better off financially this time next year, a fall of one point.
“While perceptions of current conditions remain pretty solid, there is a degree of wariness about the future, focused on the economy rather than respondents’ own financial situations,” Ms Zollner says.
The gap between the two is usually large, reflecting negative concerns about the economy against a tight labour market and positive prospects for household incomes.
The current conditions index fell one point to 124.9, above its historical average of 116.7 while the future conditions index dropped two points to 114.1, well below its historical average of 121.
Other highlights are:
- Perceptions of the next year’s economic outlook eased another four points to +3%, the lowest reading since March 2016. The five-year outlook also dipped, down two points to +14%.
- Wellington is by far the most confident region at 132 (+8pts). Confidence fell two points in Auckland and four points in the rest of the North Island, to sit in equal last place on 115. The South Island is middle of the pack.
- Expectations for national house price inflation were little changed at 3.7% year-on-year, with Wellington back in the lead at 4.8%. General inflation expectations were again unchanged at 3.9% – marking the first time in several years that a spike to these levels has been sustained.
"We do expect some harder yards for the economy going forward, with growth harder won,” Ms Zollner concludes.
“This far into an economic cycle the low-hanging fruit has typically been picked, and a number of growth drivers are fading. But that’s a far cry from calling time on the economic expansion."
The ANZ Business Outlook for July will be issued on July 31.
