Greg Smith of Devon Funds Management on consumer confidence in US and New Zealand

US consumer confidence is feeling the economic and tariff uncertainty, as Lululemon shares fell 15%, and inflation expectations are picking up.

It comes as Kiwi consumer confidence is still challenged according to a latest read. 

Greg Smith of Devon Funds Management talks to Mike Hosking. 

LISTEN ABOVE. 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Morning to you, Morning to you, Mike. Now, consumer confidence
here didn't look too good. No, it's pretty muted. Really.
This is the A and Z Roy Morgan consumer Confidence
and next that was down four points to ninety three
point two in March. That declined across nearly all components,
so the report was actually told a bit of a slog.
You've got a net sixteen percent of households disagree that's

(00:22):
a good time to buy a major household item, and
that's pretty good in the indicative retail sentiment. But interesting
it went up for people with mortgages, so that's I
guess about people coming off their lower rates. Perceptions of
confidentcial situations that fell as well, but a net sixteen
percent expect to be better off for this time next year,
so it was a positive thing perceptions going on the
economic outlook and twelve months time that eased as well,

(00:45):
though house price inflation and expectations that lifted slightly three
point four percent. The other interesting thing I think was
inflation expectations generally is that rose point two percentage points
to four point two percent, so that's a small increase.
It's actually the first time since June last year, and
it's been above four percent, so quite possibly suppose all
this talk around tariffs is having an impact on the

(01:06):
situation of who don't know how that's all going to
play it for us, but I brought you in. Consumes
seem pretty guarded, although some retails are telling a slightly
different story. So also on Friday we had helen Stein Glessons.
They are out with numbers for half a year and
they see that there's half your sales are up seven
point seven percent to two hundred and forty million, and
have to text it ticked up to twenty one million
margins of these debits I suppo. It's a bit like

(01:27):
seeing with other retailers and they having to discount to
get more shop through the door. But another interesting thing
was the contrast between what's happening across the Tasman and
so you look at sales for Glessons in Australia are
up sixteen percent, sales for lessons in New Zealand were
up just zero point two percent. Of a bit of divergence.
Counts do on sales are pretty flat. So just in

(01:48):
terms of an update, they said group sales the first
seven weeks five point four percent. It had the same
time last year, but margins remain under pressure, so they
having to discount still. And I suppose it goes all
the sales signs just seen up there, but she is
up slightly and up thirty percent over the past year. Okay,
state side two point eight, wasn't it? Yeah, that's right.
It's inflation expectations are a ticking up. If we firstly

(02:10):
look at the University of Michigan survey, so consumer sentiment
came in at fifty seven, but you look at long
term inflation expectations that they searched him three point five
percent and February to four point one percent of March.
The interesting thinging here was you've got going up amongst Unindependents,
but also monks, Republicans, even Trump supporters are also appreciate

(02:32):
the inflationary implications of what he's doing. So if you
look at expectations, Mike, they might actually not been this
high since early nineteen ninety three. And in terms of yeah,
you're talking about the two point eight percent read that's
on the core personal consumption expensures pricing excepts the Fed's
preferred inflation gage. It was also our fight and that
was also higher than fourcasts up point four percent for

(02:53):
the month. This is just all going to stoke concerns
about you know, where inflation is go On the bright side,
consumer spinning, that's still so that accelerated point four percent
for the month, and that's helped by rising personal incomes.
Although it does seem like the US they might be betting
down the hatches a little bit. So you look at
the personal savings rate that increase to four point six percent,
and it's also the high since June last year. So

(03:14):
I suppose if inflation expectations picking up, inflation actual inflation
read quite high, you probably think the feed is going
to continue to adopt a wait and see approach. Yeah,
And as far as American retailers concerned, what do we
read into Lulu Lemon? Is that general or a specific story? Ah,
good old Lemon. No, it's really sort of showing as
well that the yeah, the consumer is still still resilient

(03:35):
for now, but yeah, that the expectations are not so great.
So Lulu Lemony as they are actually down fifteen percent
on Friday, so the actual numbers weren't too bad. So
yoga pants are flying out the door. In the fourth quarter,
revenues up by four and a million to three point
six billion, needing come up twelve percent. But they said
that in terms of the current quarter, they expect sales

(03:56):
to be two point three billions. It's a massive Margins
also set to fall as well. Traffic's down, and you
look at intioningly comparable sales in the America's were flat.
They are up twenty percent internationally, so you know, Tom
Waltelvi's policies to make America greatagain actually are having the
reverse effect. Actually did a survey as well, and they

(04:17):
just found that consumers are spinning less due to economic
inflation concerns and that is something that appears to be
affecting a lot of retailers, and so consumers appear to
be training down. So it could be a turent few
months a year for some retailers. Okay, numbers please, Yeah,
you're still got the DOWT that was down one point
seven percent four one five eight three S and P
five hundred was down two percent. Na's deck down two

(04:39):
point seven percent, So tech stocks out of favor for
two one hundred down point one percent, Nicke down one
point eight percent, ASEX two hundred up point two percent,
seven nine eighty two. Ins X fifty were a down
point one five percent, twelve to eight seven, gold up
twenty eight dollars threeenty eighty five and outsets a new
record high a billion all down fifty six cents, six

(05:00):
nine spot thirty six. Just in the currencies here against
the US dollar there was down point four percent fifty
seven point two down slightly against Bussie ninety point nine down.
Also against the British pound forty four point two. Japanese
the end we're getting eighty five point seven that was
down one point two percent. I'm just looking ahead to
this week locally, We've got business confidence, we've got building permits,
we're gon another dairy auction, I'm shore RBA rate decision,

(05:22):
got us non fun payils and of course it is
the big one April second Liberation Day, sweeping tariffs that
we're coming in. Let's see what form you don't you make?
Good to catch up, Greg Smith, Devin Funds Management. For
more from the Mike Asking Breakfast, listen live to news talks.
It'd be from six am weekdays, or follow the podcast
on iHeartRadio