Inflation the 'grinch that stole Christmas', says Westpac
New survey findings have found consumer confidence in New Zealand has fallen to its lowest rate on record.
The Westpac McDermott Miller Consumer Confidence Index has fallen sharply in the December quarter, recording a 12-point drop since the September quarter results. According to the research company, this is the lowest consumer confidence has been since the survey began in 1988, indicating there are far more New Zealanders who are pessimistic rather than optimistic about the economic environment.
Westpac NZ is calling inflation the “grinch that stole Christmas in 2022” as financial pressures worry households. Many Kiwis are reporting their financial position has deteriorated over the past year and the majority of households expect their finances will continue to deteriorate over 2023.
“Households finances are being squeezed as we head into the holiday season,” said Westpac acting chief economist Michael Gordon (pictured above).
“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.”
Gordon said the fourth quarter downturn in consumer confidence had been widespread across age groups, income brackets and regions and for large numbers of households, the pain is still ahead of them.
Low consumer confidence has been a theme throughout 2022 – the Westpac McDermott Miller Consumer Confidence Index in March showed consumer confidence was at its lowest level since the 2008 GFC due to rising prices and fears over Omicron.
“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 and in many cases, borrowers will face refixing at substantially higher interest rates.”
Gordon said Christmas this year would be merry, but financially prudent.
“With prices charging higher and their finances being squeezed, households are putting their wallets back in their pockets. In fact, the number of households who think it’s a good time to make a major purchase has fallen to its lowest level on record,” he said.
“Similarly, many households have reported that they have scaled back their spending on leisure activities like dining out. We expect that spending will continue to weaken over the year ahead as borrowing costs push higher and the pressure on households’ finances builds.”
Imogen Rendall, market research director of McDermott Miller Limited, said this time of year often brought with it an uptick in confidence as New Zealanders looked 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,” Rendall said.
“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 and with households expected to come under even more financial pressure in 2023, it remains to be seen how much further confidence might fall.”
