Intention to spend reaches 'recessionary level' after post-lockdown surge - survey

Wallet spending concept
An ANZ July consumer confidence survey shows people think it's a bad time to spend on large purchases. Photo credit: Getty.

Consumer purchase intentions have fallen, indicating the retail sector's post-lockdown bounce is now over.     

The latest monthly ANZ-Roy Morgan Consumer Confidence Index, which interviews 1000 people across a range of demographics, shows that consumer confidence has improved markedly (19.5 points) since April. From June to July it crept to 104.3, a slight improvement.

But despite reports of a busy retail sector post-lockdown, more people think it's a bad time to buy a major household item.

Spending intentions dropped by 5 points to 0 percent, a figure that NZ chief economist Sharon Zollner called "a recessionary level".   

"A net-zero percent think it's a good time to buy a major household item, down 5, suggesting the vigorous post-lockdown bounce in retail spending will peter out quite rapidly," Zollner said.

With spending intentions at a similar level to the global financial crisis (GFC), the results indicate the flurry of spending may be over as wage subsidies - and spare cash - run out.

"This is directly at odds with both anecdotal and data showing a remarkably vigorous bounce-back in spending, particularly on big-ticket items," Zollner added.

Ahead of new retail figures due out this week, Retail NZ chief executive Greg Harford said anecdotal evidence showed the sector was operating at "two speeds".

"Some firms are reporting strong sales, others are reporting very poor trading results: there doesn't seem to be any particular pattern we can identify as to why that is," Harford said.

Although retail spending in July indicated consumer demand was holding up, since April, spending has been well-down on pre-COVID levels.

"We think things are weakening - July was not as strong as June," Harford added.

Asked whether they expect New Zealand to have good, bad, or some good, some bad times in the next 12 months, half of the survey respondents expect bad times, the net score (-33 percent) showing a 4-point improvement since June.

Slightly more people (a net 2 percent) thought they were in a better financial position compared to a year ago, compared to those in a worse position. In a year's time, a net 31 percent expect to be better off financially: a significant rise from 14 percent in April. 

Looking ahead five years, more people expected good times, rising 3 points to a net 22 percent expecting the country to prosper.

Almost half of the respondents (49 percent), now expect house prices to go up over the next two years, the highest since March. Only 23 percent expect them to fall, down from a peak of 40 percent in May.  Overall expectations were for a rise of 2 percent.   

Inflation expectations rose, with 65 percent expecting general prices to go up during the next two years. The expected increase was 3.3 percent per year, up from 2.9 percent in June.

Although consumer confidence was well off all-time lows, the figures show an "undercurrent of wariness", which could be explained by concerns about job security, particularly as the wage subsidy extension comes to an end. The global outlook will continue to impact the local economy.

"The global economy is in strife and our doors are shut to international tourists and students: our national income is now lower and while it won't hit people evenly, it will hurt," Zollner added.

In July, ANZ forecasted unemployment to peak at 10 percent in September.  On Monday, chief economist Sharon Zollner confirmed job-losses are now expected to peak in December, when it forecasts the rate of unemployment to reach 10.6 percent.

In ANZ's latest property focus report, the bank forecasts house prices to fall 5-to-10 percent.  

"Currently, the market is supported – but this support may start to wane, particularly later this year. We are wary that a number of factors could weigh in time: a tip in the balance between demand and supply, rising unemployment, caution towards debt, and tighter credit conditions," the report said.