Consumer Confidence Plummets To Record Lows As Financial Pressures Mount

The Westpac McDermott Miller Consumer Confidence Index dropped sharply in the June quarter, falling 13 points to a level of 78.7. That’s the lowest level recorded since the survey began in 1988, and indicates that there are far more New Zealanders who are pessimistic about the economic environment than those that are optimistic.

“Household budgets are being squeezed in a way that they haven’t been for decades,” commented Westpac’s Acting Chief Economist Michael Gordon. “The combination of rising mortgage rates and increases in living costs has already taken a large bite out of disposable incomes. And with interest rates set to rise even further, many households will find the pressure on their finances becoming more intense over the coming months.”

“The pressure on household finances is weighing on spending appetites, and we’re expecting a downturn in economic growth more generally over the coming months,” noted Mr Gordon. “The extent of that downturn will have an important bearing on how much further the Reserve Bank will raise the Official Cash Rate. If demand slows sharply – consistent with the drop in consumer confidence – increases in the cash rate are likely to fall short of what financial markets are expecting.”

“There continue to be clear contrasts across the different demographic groups, with some having experienced very large drops in confidence this June quarter. Men are now almost as pessimistic as females, having experienced a sharp fall in confidence (down 21 points to 78.9). In contrast, women’s confidence dropped 6.2 points to sit just below men at 78.5. Rising prices and interest rate increases are having an impact on the financial position of both men and women, but when it comes to their own financial situation improving in a year’s time, men are far more pessimistic,” noted Imogen Rendall, Market Research Director of McDermott Miller Limited.

“Those aged 30-49 have been cautiously optimistic for the last three quarters, but this June quarter that optimism nose-dived 26.1 points to 77.1. Household finances of those in this age group are likely to be being put under significant strain, as prices continue to rise and mortgage rates go higher. Confidence of younger people aged 18-29 has dropped again from last quarter, falling to 86.1 (down 5.9 points). There is a similar story with those aged 50 plus, with confidence having fallen each quarter for the last year: this age group now sits on 78.1 (down 4.8 points),” said Ms Rendall.

“With many respondents expecting bad economic times ahead for New Zealand, as well as an expectation that their own financial situation will worsen, it looks like we are in for a bumpy ride,” commented Ms Rendall.

A full description of the background and specifications of the survey are attached. The survey was conducted over 1-14 June 2022, with a sample size of 1,559. An index number over 100 indicates that optimists outnumber pessimists. The margin of error of the survey is 2.5%.

Acknowledgement

The Westpac McDermott Miller Consumer Confidence Survey and Index is owned by McDermott Miller Limited. Westpac McDermott Miller should be acknowledged as the source when citing the Index. Graphs supplied may be reproduced by the news media provided the Westpac McDermott Miller logo remains inset.

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