Westpac McDermott Miller reports renewed optimism in consumer sentiment
As New Zealand gears up for the festive season, the Westpac McDermott Miller Consumer Confidence Index for December reflected a significant uplift in mood among Kiwi households.
Climbing seven points to 97.5, this index marks the highest level of consumer confidence since 2021, though it remains slightly below the long-term average. This increase suggests a more optimistic outlook for the economy and personal financial situations as we move into the new year.
Financial pressures easing
The recent boost in consumer spirits largely stems from decreased inflation and falling mortgage rates, which have somewhat alleviated the financial strains of recent years.
“It’s been a tough few years for a lot of New Zealand families, and that’s been in large part due to the cost-of living crisis and related increases in interest rates,” said Satish Ranchhod (pictured above), senior economist at Westpac NZ. “The sting from those factors hasn’t gone away. But as 2024 draws to a close, their impact is easing.”
Inflation has now receded to 2.2%, offering a respite that many households find encouraging.
Cautious spending this holiday season
Despite the relief from economic pressures, New Zealand households are not expected to indulge in extravagant spending over the holidays.
While there has been a modest increase in expenditure, particularly in hospitality sectors like bars and restaurants, major purchases remain on the back burner for most families.
This indicates a careful approach to spending, likely influenced by the fixed nature of many home loans, which insulates them temporarily from changes in interest rates.
Regional variations in confidence
Confidence levels vary significantly across the country, with notable increases across the South Island and a buoyant mood in Auckland, now the most optimistic region.
In contrast, confidence in Wellington has dipped, reflecting growing concerns over financial stability amid cuts in public sector spending and employment.
Looking ahead
As interest rates continue to adjust and the impact of lower borrowing costs begins to be felt more broadly, consumer confidence and spending are expected to strengthen further into mid-2025.
“Oh come all ye faithful!” reflects the sentiment among middle and higher income households, particularly those with mortgages, who anticipate more significant financial relief from rate cuts in the upcoming months, Ranchhod said.
This detailed survey conducted in early December provides insights not only into current consumer behavior but also into expectations for the future, indicating a cautiously optimistic trajectory for New Zealand’s economy heading into the new year.
Read the full Westpac McDermott Miller Consumer Confidence Index report here.
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