Key facts
- New Zealand's consumer confidence index rose to 98.8 in June, up from 92.9 in May.
- Two-year ahead CPI inflation expectations increased to 4.9% year-on-year.
- One-year inflation expectations rose to 2.41%, with longer-term projections within the RBNZ's target range.
- A net 20% of New Zealanders expect to be better off financially this time next year.
- The Reserve Bank of New Zealand is expected to cut the Official Cash Rate by 25 basis points in May 2025.
Consumer confidence in New Zealand saw a notable increase in June, reaching 98.8 according to the ANZ-Roy Morgan Consumer Confidence index, a significant rise from 92.9 in May. This rebound is partly attributed to a softening in two-year inflation expectations, which edged up to 4.9% annually, driven by food and energy costs. Despite this improvement, the overall economic outlook remains somewhat subdued, with indicators such as the willingness to purchase major household items remaining in negative territory.
However, a net 20% of New Zealanders anticipate being better off financially in the coming year, signaling a degree of optimism. The Reserve Bank of New Zealand (RBNZ) is expected to initiate an easing cycle, with a 25 basis point cut to the Official Cash Rate anticipated in May 2025. This potential monetary easing could further support economic recovery by lowering mortgage rates and boosting purchasing power, particularly in interest-sensitive sectors like retail and goods production.
While inflation expectations have risen, particularly for food and energy prices, longer-term projections remain within the RBNZ's 1%-3% target range. The RBNZ's anticipated rate cuts are seen as crucial for offsetting inflationary pressures and bolstering the economy. Investors are advised to consider selective opportunities in consumer discretionary sectors, focusing on companies with pricing power or those benefiting from essential demand.