Economic challenges ahead
Tony Alexander (pictured above), an independent economist, has noted a significant shift in consumer behaviour this winter, as revealed in his monthly Spending Plans Survey.
The survey found a net 36% of the 555 respondents planning to cut back on spending in the next three to six months, a steep decline from earlier in the year.
“That is, 36% more of the respondents plan to cut their spending than plan to increase it,” Alexander said in an analysis for OneRoof. “This is a deterioration from -30% at the start of April and -13% in December.”
Impact on retail and discretionary spending
The downturn affects various sectors differently, with substantial reductions planned in areas like motor vehicles, dining out, and household items.
“In fact, a net 16% of people plan spending less on motor vehicles, a net 44% plan cutting spending on eating out, and a net 27% plan buying fewer household appliances and items of furniture,” Alexander said.
Conversely, spending on essentials like groceries has increased, primarily due to rising costs, while international travel remains a priority for some, driven by pent-up demand from the pandemic.
Growing concerns about employment
Alexander’s research highlighted a dramatic increase in employment concerns among consumers.
“In January that reading was 14%. Now it is a record 50%,” he said. “This neatly and clearly shows us the key thing which has changed in our economy since the start of the year – employment confidence and job security.”
This shift is affecting real estate activities as well, with a net 37% of real estate agents reporting fewer attendees at open homes compared to more active periods earlier in the year.
Real estate market trends
The real estate market itself has seen a reversal from the growth spurt in mid-last year, now showing signs of stagnation and decline. Alexander predicted that the market won’t see an improvement until there is a significant decrease in mortgage rates.
“When might mortgage rates fall by enough (1%) to cause renewed upward movement? I’d say by the end of the March quarter next year,” he said. “When that happens, focus is likely to turn to the rapid decline in house building despite strong population growth and rules less negatively impacting investors.”
Amid these challenges, Alexander remarked on the prevailing business sentiment, quoting the mantra, “survive to ‘25.”
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