Consumer confidence in the economic outlook has dropped to levels just “modestly above historic lows,” a Westpac McDermott Miller poll has found.
The poll said the index of consumer confidence plummeted by 11 points to 82.2 in June, reversing the gains achieved over the previous six months.
A level below 100 points in the index suggests a prevailing pessimism about the economic situation compared to optimism. Historically, the index has averaged 108 points since the late 1980s.
“New Zealand households are continuing to be buffeted by strong financial headwinds,” Westpac senior economist Satish Ranchhod said.
“Recent months have seen hopes for an early reduction in interest rates as inflation has held up. Ongoing high borrowing costs, combined with a more uncertain labour market, is undermining consumer confidence,” he added.
He mentioned that 42% of households reported a deterioration in their financial position over the last year, whereas only 14% noted an improvement.
Ranchhod pointed out that, due to financial pressures and uncertainty about the economy’s direction, New Zealanders were “keeping their wallets shut.”
“Even with strong population growth, retail spending levels have been falling in recent months, with households switching away from ‘nice to haves’ and towards value-for-money.”
The poll has also found that confidence among men has dropped by 12.6 points, sitting at an index score of 89.1. Meanwhile, women were “much more” pessimistic, marking at 75.4—a drop of 9.3 points.
“Almost half of women see themselves as worse off financially than they were a year ago, compared with just under a third of men,” the report stated.
When asked about the next year, both men and women expressed pessimism about New Zealand’s economy, with approximately 25% anticipating a decline in their financial situation.
As consumers prioritise spending on necessities over discretionary items, the retail sector is witnessing declining sales, tight margins, and reduced profits.
The Warehouse Group, New Zealand’s largest listed retailer, unveiled a back-to-basics restructuring and management shake-up to focus on its main brands. The company has faced a difficult few months, reporting declining sales and margins, significant losses from asset write-downs, selling its Torpedo 7 business for $1, and shutting down its online marketplace.
Business leaders in Wellington and Canterbury are also facing the worst conditions, with 46 empty shopfronts on Wellington’s Golden Mile at the end of 2023. Meanwhile, inflationary pressure and rising interest rates were the top issues for Canterbury businesses, followed by consumer confidence.