Consumer confidence tracks down again on surging price for ‘necessities’

Friday, 1 August 2025

Kiwis are concerned about inflation, with many believing prices will go up in the next two years.

Inflation, particularly in the price of necessities, has become a top-of-mind concern for Kiwis according to the latest major consumer confidence survey.

The ANZ-Roy Morgan Consumer Confidence reading for July showed more than 81% of householders’ believed prices would go up in the next two years, and where they thought inflation would land was up 0.2% to 5.1%, the highest reading in the last 24 months.

While 5.1% is far beyond the current headline inflation of 2.7%, ANZ economists said the reason people were projecting a much higher figure was because “prominent necessities” like insurance, electricity and council rates were increasing at a higher rate, and food inflation currently sat at 4.2%.

While expectations, and what actually happens, frequently varies, an expectation of high inflation pumps the brakes on spending, and can have a significantly negative impact on sectors like retail and hospitality.

“At this stage of the business cycle, inflation in necessities is crowding out discretionary spending,” said ANZ Chief Economist Sharon Zollner.

ANZ Chief Economist Sharon Zollner, and her team, was once more the bearer of bad news about consumer sentiment.

The proportion of households thinking it’s a good time to buy a major household item, for example, fell 1 point to -8, remaining very weak, the report authors found.

Overall confidence fell 4 points to 94.7 in July, erasing gains made in the last survey. But perceptions of current personal financial situations dropped even more sharply, down 8 points, and are very weak at -21%. Just 11% of people expected to be better off this time next year.

Hard work

“Fair to say the economy is making hard work of recovering from last year’s recession,” said Zollner, adding it was “entirely possible” that both GDP and employment went backwards in the June quarter. The quarter’s metrics will be released on September 18.

Meanwhile, housing bucked the trend, with house price inflation expectations fell to 2.9% year-on-year from 3.6% in the prior comparative period, its lowest level in over a year.

But for economists, it’s not a good thing.

“The housing market is going nowhere fast,” said Zollner. “Soft consumer confidence is both a reflection of and a contributor to the sluggish economy.

Kiwibank chief economist Jarrod Kerr has said it reflects two different economies, one rocketing and one fizzing.

Refinancing of mortgages is predicted to provide some relief to households. Reserve Bank data released on Thursday showed mortgage refinancing activity in June reached its highest level since 2017, with the interest rates more than $2.5 billion in loans renegotiated.

Nearly 14% of mortgages are now on floating rates, and a further 39% are fixed and due to roll off by the end of 2025 – with consumers showing active engagement in the process of finding themselves the most competitive rate.

That activity, which will continue through 2025, along with record export prices for New Zealand goods meant the ANZ economists did expect consumer sentiment to improve towards the end of the year.

In addition, “easing inflation pressures will allow [the RBNZ] to cut the Official Cash Rate more than they currently anticipate in order to shore up the recovery”.