NZ households face increased economic uncertainty, says Westpac
The Westpac-McDermott Miller Consumer Confidence Index, conducted from March 1-12, with a sample size of 1,550, has reported a significant drop, falling eight points to 89.2 in March.
“March’s fall in consumer confidence comes at the same time as there’s been growing nervousness about the global backdrop,” said Satish Ranchhod (pictured), a senior economist at Westpac.
Recent weeks have witnessed heightened trade tensions and financial market volatility, further intensified by international political disputes. These developments, according to Ranchhod, have clouded the economic outlook, increasing uncertainty for New Zealand households.
Persistent financial struggles
Despite a slight ease in inflation to around 2%, New Zealand households continue to grapple with substantial increases in living costs from recent years.
“Financial pressures also continue to be a big concern for many households,” Ranchhod said.
These pressures are driven by rising costs for essentials like food and local council rates, which significantly squeeze household spending power.
Gradual economic and confidence recovery expected
Although household confidence has trended higher over the past year, largely due to significant drops in interest rates since mid-2024, the recovery is anticipated to be slow.
“However, the key word here is ‘gradual,’ Ranchhod said. “As this recent fall in economic confidence highlights, there are a range of concerns that are still worrying New Zealand households, and that’s likely to constrain spending for a few more months at least.”
NZIER forecasts a -0.8% GDP contraction for New Zealand by March, following mid-2024 declines. Yet, 2025 looks brighter with an anticipated 2.1% growth, spurred by lower interest rates
Regional variations in consumer confidence
Consumer confidence varies significantly across regions, with Wellington experiencing particularly low levels due to financial headwinds and reduced public spending.
In contrast, regions with strong rural or tourism links, particularly in the lower South Island, exhibit more optimism, according to the Westpac-McDermott Miller survey.
Demographic insights on economic pessimism
According to Imogen Rendall, market research director of McDermott Miller, pessimism has risen across all demographic groups.
“Men’s confidence has dropped considerably this quarter by 11.3 points to an index score of 97.3,” Rendall said. “Confidence amongst women has also dropped, and they remain much more pessimistic at 81.4.”
Both genders express concerns about the economic future, with only a small fraction expecting good economic times in the coming year.
Age and employment impact on consumer confidence
All age groups have witnessed a decline in confidence this quarter, with the 30-49 age group experiencing the most significant drop. Those in paid work reported a 13-point decrease in confidence to 91.8, while those not in paid work saw almost no change.
