Consumer confidence sinks to lowest level ANZ survey has recorded

Friday, 4 March 2022

Consumers appear largely of the same mind about where the economy is heading.

Consumers’ confidence in the economic outlook has sunk to a lower level than when Covid first struck and the nadir it experienced during the Global Finance Crisis in 2008, according to an ANZ survey.

The bank said its consumer confidence index crashed 16 points in February to stand at 82 points, which was lowest the index has been since the bank began the surveys in 2004.

ANZ chief economist Sharon Zollner said it was “remarkable” confidence was lower than when Covid first struck early in 2020, “when the uncertainty was so extreme”.

That was a time when economists were making dire predictions about the impact of the pandemic on GDP and the Government was warning unemployment could hit double-digits.

* Business confidence survey suggests inflation could hit 8%, says ANZ

* Putin's war on Ukraine could raise inflation but slow global interest rate hikes

Reserve Bank governor Adrian Orr discusses the level of concern about inflation in February.

A net 2 per cent of people expected in February to be worse off in a year’s time, which is the first time that measure has fallen into negative territory in ANZ’s survey.

The proportion of people who thought it was a good time to buy a major household item sank 17 points, with a net 21 per cent saying it wasn’t.

Zollner said about 10 to 15 per cent of responses would have come in after Russia’s invasion of Ukraine, but the bank did not know if those responses differed from the average.

“We can only guess what consumers had in their mind when they responded to the survey.”

But Omicron was the “big news” that month and seemed to have had an “enormous impact across the whole survey”, ANZ said in its commentary on the results.

Zollner was hopeful there could be a quick bounce back in confidence, but said that “even without Omicron” there was a lot of head-wind.

“This month’s data looks grim, but there are undoubtedly some temporary impacts in there,” the bank said in its commentary.

“Time will tell what the other side looks like, but we do know that Omicron is fast and furious and will blow through relatively quickly.”

To date, bank analysts and the Reserve Bank have primarily viewed the invasion of Ukraine through the lens of the inflationary pressures the invasion and sanctions could create, rather than as anything potentially more existential.

“Certainly the economic impacts are potentially significant,” Zollner said, pointing to spikes in the price of oil and gas.

“It is another big global inflationary supply shock.”

ANZ reported a sharp drop in business confidence on Monday, also reporting that businesses’ pricing intentions were consistent with inflation blowing out to 8 per cent.

Its consumer survey showed that, on average, people expected houses prices to rise at an annual rate of 4.8 per cent over the next two years, with a net 49 per cent expecting an increase over the period.

The average expectation was that annual inflation would average 5.6 per cent over the next two years.