New Zealand consumer confidence flat ahead of RBNZ rate decision

August's near-flat consumer confidence reading provides no clear guidance for the RBNZ before its September 2 Monetary Policy Statement, with economists evenly divided between keeping rates unchanged and raising them by 25 basis points to 2.75%. Inflation expectations among households remained at 4.7%, still above the target and not likely to single-handedly influence the Committee's decision. The weaker current conditions index indicates continued pressure from past oil price increases, while the five-year outlook reached its highest since May 2021, implying that households view current difficulties as transitory.

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New Zealand households remain cautious but are growing more optimistic about the longer-term future, providing a stable environment for the RBNZ as it considers whether to hold or hike on September 2.

Key data points:

• The ANZ-Roy Morgan Consumer Confidence index fell 1 point in August to 98.0, remaining below the neutral level but 18 points higher than its April trough.
• Two-year inflation expectations remained nearly steady at 4.7%; expectations for house price inflation dipped from 2.6% to 2.5%.
• The current conditions index declined from 88.5 to 83.4, while the future conditions index increased to 107.7, and the five-year outlook reached its strongest reading since May 2021.
• The RBNZ's September 2 Monetary Policy Statement comes after a July increase of the OCR to 2.50%.

In August, New Zealand consumer confidence slipped slightly, staying under the 100 neutral threshold but significantly above its April low. Households are still dealing with the effects of an oil price shock while long-term outlook improves. The figures arrive just ahead of the RBNZ's September 2 Monetary Policy Statement, where policymakers face a closely contested decision between leaving the Official Cash Rate unchanged and raising it again.

The headline index declined 1 point to 98.0. The current conditions sub-index fell from 88.5 to 83.4, while the future conditions sub-index increased to 107.7, broadening the gap between current sentiment and expectations. A net 21% of respondents reported being worse off than a year ago, but a net 22% anticipate being better off next year — the strongest forward-looking reading since January. The five-year outlook climbed to +13%, its highest since May 2021, indicating that households are increasingly viewing recent hardships as temporary.

Two-year inflation expectations remained at 4.7%, remaining significantly above the target, while house price expectations edged down. ANZ said part of the weakness in current sentiment came from increased petrol prices in August, although those have since steadied, and observed that discretionary card spending is moving higher as disruption in the Middle East subsides.

The Reserve Bank increased the OCR to 2.50% in July with unanimous agreement, and has since flagged reduced near-term inflation pressure after a partial Hormuz reopening. For September, economists are still split, with opinions divided between another 25 basis point increase to 2.75% and leaving rates unchanged, a division reflected in the August data between cautious near-term views and longer-term optimism.