NZ Misery Index May Have Peaked, Says BNZ
New Zealand's 'misery index', which combines inflation and unemployment rates, may have peaked according to recent data. The index currently stands at 9.7 percent, its highest since mid-2023, with annual inflation at 4.1 percent and the unemployment rate at 5.6 percent.
July's electronic card spending showed a 1 percent month-on-month bounce, reversing most of June's decline and returning to around pre-fuel price spike levels. However, the uptrend in monthly card spend remains slow, particularly when viewed on a per-capita basis.
Tourism spending has been an important prop for the retail sector, with tourist arrivals into South Island airports hitting a record high in the year to June, although recent data shows a slowdown in recovery pace. Population growth is another key driver of retail spending, but net migrant arrivals have flattened and may even be revised downward.
Despite challenging conditions including high inflation, a tough jobs market, flat house prices, and rising mortgage rates, consumer spending growth remains positive albeit sub-par. The Bank of New Zealand (BNZ) believes that the 'misery index' has peaked and will decline in the coming 12 months as inflation and unemployment rates are forecast to fall.