The Trump tariff are likely to hit consumer confidence hard. Photo: DANIEL ROLAND / AFP
Consumer confidence is ailing, with the malaise expected to linger longer given a long list of reasons for concern.
A report by BNZ chief economist Mike Jones suggests the few positive reasons for a change of mood had been offset by the onset of an international trade war and the slump in global markets.
He said tariffs will cause prices to rise in the United States, with implications for New Zealand.
"All up, it's impossible to know at this point how much of an impact these factors might have on NZ spending appetites," he said. "We fear that our current forecast pick-up in economic activity may yet be further delayed."
Mortgage interest rates were coming down, but most of the lower rates were yet to flow through to many homeowners.
Recent data also indicated household spending continued to exceed income for the 12th quarter in a row, with pent-up savings a distant memory.
Headline consumer price (CPI) inflation was under control, but recent inflation left prices up 22 percent on four years ago. Households had few options but to pay more for essentials such as insurance, energy and rates.
Spending in more discretionary categories was suppressed, with energy hikes expected to further stretch household budgets.
The weak labour market was another cause for concern, with slow earnings growth, further anticipated increases in unemployment and job insecurity.
Will global uncertainty make things worse?
Jones said global equity markets were in freefall, and even a cursory look at KiwiSaver balances in this environment will be "dread-inducing", potentially curtailing spending appetites.
Recent household data indicated listed equities, managed funds and superannuation, including KiwiSaver, made up 29 percent of household financial assets.
"No one knows what the end game is for the trade war, nor how or when the current financial market turmoil will end," Jones said, adding the uncertainty looked set to drag on for potentially months.
Jones said consumer uncertainty could also be a major constraint for business investment and hiring plans as firms opted to sit and wait for sentiment to improve.
"We've been flagging the risks to business investment for a while."
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