Westpac McDermott Miller Consumer Confidence, December Quarter 2022

The Westpac McDermott Miller Consumer Confidence Index fell sharply in December, dropping 12 points to 75.6. That’s the lowest level consumer confidence has been 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.

“Households finances are being squeezed as we head into the holiday season,” commented Westpac’s Acting Chief Economist Michael Gordon. “As well as increases in borrowing costs, the sharp rise in consumer prices is eating away at households’ spending power. There have been particularly large increases in the cost of food, housing, and petrol prices over the past year, and those increases are being felt by every family across the country. Consistent with that, the downturn in confidence has been widespread across age groups, income brackets and regions.”

“Importantly, for large numbers of households, the pain is still ahead of them,” noted Mr Gordon. “Many borrowers are still on the very low mortgage rates that were on offer in the early stages of the pandemic. However, around half of all mortgages will come up for repricing over the next 12 months. In many cases, borrowers will face refixing at substantially higher interest rates.”

“With prices charging higher and their finances being squeezed, many households have scaled back their spending,” said Mr Gordon. “We expect that spending will continue to weaken over the year ahead as borrowing costs continue to push higher.”

“This time of year often brings with it an uptick in confidence, as New Zealanders look forward to the festive season and a long summer stretching ahead of them. Instead, there are no good news stories this Christmas, with consumer confidence at its lowest point since the Westpac McDermott Miller survey began,” commented Imogen Rendall, Market Research Director of McDermott Miller Limited.

“Many respondents expect bad economic times ahead, not just over the next 12 months but for the next five years. They are not only worse off financially than a year ago, they expect their personal situation to further deteriorate over the next year. With households expected to come under even more financial pressure in the New Year, it remains to be seen how much further confidence might fall,” noted Ms Rendall.

“New Zealand is not alone on the global stage with its rapidly increasing prices, contracting supply chains and rising borrowing costs, but that knowledge will do little to lessen the pain for households this holiday season,” suggested Ms Rendall.

A full description of the background and specifications of the survey are attached. The survey was conducted over 1-12 December 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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