Rising prices put deep dent in consumer confidence

Rising prices and Omicron concerns have pushed consumer confidence to its lowest level since the 2008 global financial crisis.

The Westpac McDermott Miller Consumer Confidence Index fell seven points in March to a level of 92.1.

An index number below 100 indicates that there are more New Zealanders who are pessimistic about the economic environment than there are those who are optimistic.

Households reported that their financial position has deteriorated as inflation has started to bite, the survey found.

“New Zealand is being buffeted by a range of powerful economic headwinds,” said Westpac’s acting chief economist Michael Gordon.

“Many households have reported that their financial position has deteriorated over the past year, and a growing number expect their finances will come under pressure over the months ahead.”

One of the biggest concerns for households had been the rapid rise in the prices of many household

goods, which has far outpaced the growth in wages, Gordon said. “In particular, increases in the prices of food and fuel have siphoned a large amount out of households’ wallets, and that is squeezing spending in other areas.”

Confidence is at low levels in every part of the country. Recent months have seen sharp falls in both Nelson and Otago.

That was likely to be related to the significant challenges that the hospitality sector is grappling with, including subdued consumer demand and widespread worker absenteeism as Omicron has rippled through the workforce.

However, there have also been sharp drops in confidence in many other regions. Compounding the pressure, mortgage interest rates had continued to push higher.

The rapid spread of Omicron was also likely to have dampened confidence in recent weeks.

Confidence also fell sharply for younger people, the survey found.

The index number for ages 18-29 fell below 100 for the first time since the beginning of the pandemic, with a large drop of 15.2 points to 91.9.

Households also reported they have become increasingly apprehensive about making major purchases. The number of households who think it’s a good time to buy a major household item has now fallen to its lowest level in 14 years.

New Zealand is being buffeted by a range of powerful economic headwinds.

Michael Gordon, Westpac