Rising oil prices push NZ consumer confidence down to 97.6, inflation outlook softens

The survey did little to boost the New Zealand dollar, which hit its lowest level in 11 months during the past 24 hours. While softer headline inflation expectations would normally relieve pressure on the RBNZ, the rise in expectations late in the month as oil prices increased is more significant for traders, since fuel costs quickly affect how households perceive prices. If crude oil remains high, the mix of weaker sentiment and stronger inflation expectations makes the RBNZ's trade-off between growth and prices less comfortable. For the currency, ANZ notes that a weak NZD supports exporters and tourism, which might reduce official concern about further depreciation.

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Meanwhile, regarding the Australian dollar:

• The AUDUSD pair dropped to its lowest level since early July.

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New Zealand consumers started September on a more stable note than they ended it, as a mid-month surge in oil prices eroded confidence and pushed price concerns higher under a seemingly calm monthly average.

Survey summary:

• In September, the ANZ-Roy Morgan consumer confidence index declined by 0.4 points to 97.6, remaining below 100 but about 17 points higher than April's trough.
• Current conditions increased to 87.3 from 83.4, while future conditions dropped to 104.5 from 107.7.
• Two-year inflation expectations fell to 4.5% from 4.7%, their lowest level since March 2025; house price expectations decreased to 2.4%.
• The net 12-month economic outlook deteriorated to -16 from -12, and the five-year outlook eased to +10 from +13.
• Weekly survey data indicated that confidence weakened and inflation expectations rose as oil prices spiked in mid-September.
• ANZ expects the recovery to continue but to be gradual and fragile, and believes the Reserve Bank of New Zealand is unlikely to tolerate rapid growth.

New Zealand consumer confidence inched down in September as a steep increase in oil prices seemed to drain sentiment throughout the month, the ANZ-Roy Morgan survey released on Friday showed.

The main index slipped to 97.6 from 98.0 in August, placing it just under the 100 threshold that divides optimism from pessimism. It remains about 17 points above April's low, when the index fell to around 80, indicating that households have recovered much of the territory lost earlier this year but are finding it difficult to advance further.

The breakdown was mixed. The current conditions index increased to approximately 87 from about 83, while the future conditions index dropped to around 104.5 from roughly 108. A net 19% of respondents reported being worse off than a year earlier, improving from 21%, and a net 20% expect to be better off in a year, slightly lower than August. Perceptions of the economy over the next 12 months weakened, with the net balance falling to -16 from -12, while the five-year outlook softened to +10 from +13. Sentiment regarding purchases of major household items rose by 5 points but stayed negative, at a net -7.

Two-year inflation expectations dropped to 4.5% from 4.7%, the lowest level since March 2025, and house price expectations declined to 2.4%, the lowest since July 2024.

However, ANZ pointed out that the monthly averages might hide a change within September. Oil prices increased steeply during the month, reaching a peak around mid-September before partially pulling back, and a weekly analysis of the survey indicated that confidence began September stronger than it ended, while inflation expectations ended the month higher. The bank warned that weekly splits of the sample provide only a rough approximation.

ANZ characterised the economy as a varied picture. Robust prices for key export goods and a weak New Zealand dollar are boosting exporters and tourism, but the housing market is losing steam, monetary stimulus is being removed, unemployment stays high, and cost-of-living pressures endure. The bank forecasts that the recovery will continue but will be gradual and fragile, adding that the Reserve Bank of New Zealand is unlikely to accept a rapid acceleration in growth that might endanger inflation.