Consumer confidence still in the doldrums despite slight lift

Consumer confidence has improved slightly but remains deeply pessimistic, as high interest rates and prices squeeze household budgets.

The Westpac McDermott Miller survey showed a 5.4 point rise in sentiment in the June quarter to 83.1. A reading below 100 indicates pessimism.

Westpac senior economist Satish Ranchhod said households have had to cope with the rising cost of living and interest rates, with more than 40 percent of respondents reporting they were financially worse off than last year.

“Large increases in living costs, especially for necessities like food, are hitting every family in the country in the pocket. On top of that, many families are also grappling with higher borrowing costs. Those factors are squeezing households’ finances and are constraining spending in the economy.”

The survey showed expectations of households’ own financial positions in the coming year was marginally negative, and there was a modest reduction in the pessimism about the one- and five-year economic outlooks.

Ranchhod said some of the headwinds were easing, such as inflation, but the number thinking it was a bad time to buy a big ticket item remained significantly negative.

“That will be a significant drag on economic growth through the latter part of the year.”

McDermott Miller head of market research Imogen Rendall said sentiment remained negative in all regions and sectors of the population.

“It looks like the overwhelming feeling of pessimism amongst consumers is going to remain for the foreseeable future.”

Men were less negative than women and more optimistic about the country’s long-term financial outlook, Rendall said.

Sentiment among all age groups was negative, although the biggest improvement was in those over 50, while the 18-29 bracket was the least pessimistic, and the 30-49 age group was barely changed and the most negative.

All 11 regions surveyed were downbeat, but the strongest improvement was in Wellington, with solid gains in Bay of Plenty, Gisborne/Hawke’s Bay, and Southland, but pessimism deepened in Nelson/Marlborough/West Coast.

Ranchhod expected confidence would gradually improve after hitting a record low in December, as price pressures eased, interest rates peaked, and the housing market became more balanced.