Consumers nervous on economic outlook

Households are winding back spending plans as confidence drops.

The Westpac McDermott Miller consumer confidence index showed a sharp dip in December. Down 5 points to 107.4, the index is now at its lowest in more than a year, and below the long-run average.

Confidence fell across all eight measures, including individual household financial situation and the outlook for the economy over the next five years.

Nervousness about the economy appears to be hitting household decisions.

The number of those who expect to be better off financially over the next year dropped to the lowest level since 2012, as did the number who believed it was a good time to buy a major household item.

‘‘Households have told us that they are nervous about both the general economic environment and the outlook for their own financial situation over the coming years,’’ Westpac chief economist Dominick Stephens said.

"This has seen many households winding back their spending plans." Westpac chief economist Dominick Stephens

‘‘This has seen many households winding back their spending plans.’’

The results of the Westpac survey came a day after the ANZ-Roy Morgan consumer confidence survey for December, which also showed confidence fell for the third month in a row.

However, the ANZ survey showed a net 14 per cent of respondents felt they were in a better financial position than a year ago, which was similar to the results over the past 12 months.

Westpac attributed some of the fall in confidence to the change in Government.

In October, NZ First opted form a Government with Labour and the Greens, which meant tax cuts approved by National were scrapped, replaced by a families package which broadly benefits lower-income households.

Among households with annual incomes of less than $70,000, confidence actually rose three points, with a sharper drop in confidence among wealthier households, the Westpac survey showed.

Stephens said the election was not the sole reason for weaker confidence.

‘‘The fall in consumer confidence adds to the range of economic indicators we’ve seen recently which signal that the economy is losing momentum,’’ he said.

Meanwhile, business confidence, which fell to an eight-year low in November, lifted marginally in December.