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Consumer confidence has turned pessimistic in the past three months, as rising mortgage rates and Covid-19 variants weigh on household’s appetite to spend.
The Westpac Bank-McDermott Miller Consumer Confidence Survey for the December quarter shows headline confidence has receded well below its historical average, dropping 3.6 points to 99.1.
An index below 100 indicated more New Zealanders were pessimistic about the economy than those who were optimistic. The historical average was 110.6.
Westpac senior economist Satish Ranchhod said many households reported they expected their finances to come under pressure in 2022, as they dealt with rising borrowing costs and higher consumer prices.
Higher borrowing costs have already taken a bite out of many households’ disposable incomes, and many more will face re-fixing at higher interest rates over the coming year.
“A large number of households will also have found their purchasing power squeezed by the rapid rise in consumer prices, which in many cases will have outpaced the growth in wages.”
Other parts of the country had also missed Aucklanders over the past few months, Ranchhod said.
“Confidence is at low levels in every part of the country, and there have been sharp falls in tourist hot spots like Queenstown, Nelson and the Bay of Plenty.
“The combination of social distancing requirements and a lack of tourists from Auckland has been a significant drag on spending in those regions.”
McDermott Miller market research director Imogen Rendall said the Christmas feel-good factor that often saw a jump in consumer confidence was missing this year.
“With New Zealand not yet out of the woods with Delta, the potential implications of Omicron breaching fortress New Zealand and spreading out into the community seem to have been firmly in respondents’ minds as they completed the survey this quarter.”
Confidence was also dented across all income groups for the quarter, Rendall said.
“Those in the lowest income group (less than $30,000 a year), have seen the biggest drop in confidence of 4.6 points and now have an index score of 86.6. This group has seen their personal finances worsen and many were concerned that their finances would continue to deteriorate over the coming year.”
But in contrast, those with a household income greater than $100,000 were still optimistic.