Consumer confidence rises but economic outlook remains 'grim', Westpac report finds

New Zealand consumer confidence rebounded slightly in the last quarter after a record decline earlier this year.

But the rise is little cause for optimism, according to Westpac as the bank painted a grim economic picture for the months ahead.

In June, the Westpac McDermott Miller Consumer Confidence Index was 78.7 - its lowest level since 1988.

The latest index on Thursday revealed a rise of 8.9 points to 87.6. Anything below 100 indicated there were more people pessimistic about the economy than optimistic.

"While that is up from the record lows seen earlier in the year, confidence remains weak," Westpac said. "There are still many more New Zealanders who are pessimistic about the economic environment than those who are optimistic."

The Westpac report said the cost of living and rising interest rates would continue compounding the pressure on household budgets in the coming months.

"It's hard to describe the mood in the country as anything but grim," Westpac senior economist Satish Ranchhod said. "Households' finances are being squeezed by the rise in living costs and higher mortgage rates. The pressure on household budgets has been especially pronounced for those on lower incomes."

Westpac found consumer confidence had risen across some demographics but remained low among others.

"Men's confidence has jumped this quarter to 92.1 (up 13.1 points,) while women remain heavily pessimistic at 83.3 (an increase of just 4.8 points)," McDermott Miller market research director Imogen Rendall said. "While both men and women are similarly concerned about their personal finances and New Zealand's short-term economic prospects, men are much more bullish about New Zealand’s longer-term financial prosperity."

Also bucking the pessimism trend were those aged between 18 and 29 who recorded a significant lift in confidence - up 30.1 points to 116.8. 

"Driving this is the view of many in this age group that they are better off financially compared with a year ago, combined with the expectation that things will continue to improve for them personally over the next 12 months," Rendall said.

Consumer confidence rises but economic outlook remains 'grim', Westpac report finds
Photo credit: Westpac

Optimism for people over 50, meanwhile, only rose 2 points to 80.

Statistics NZ in July reported inflation was at a three-decade high and the global economic situation had continued to worsen, largely driven by Russia's invasion of Ukraine and COVID-19 lockdowns in China. While New Zealand's gross domestic product (GDP) rebounded in the second quarter - rising by 1.7 percent after a 0.2 percent fall - economists signalled further economic volatility was ahead.  

The Government has repeatedly said the "tough international environment" was behind the current economic situation

Prime Minister Jacinda Ardern acknowledged earlier this week the escalating consumer prices but said they were down to global factors as well as the local supermarket industry - which the Government has moved to reform

Facing questions over when consumers would start to see the impacts of the Government's changes to the supermarket industry - which aimed to encourage more, smaller retailers to enter the market - Ardern told AM the implementations "alongside initiatives like food in schools, taking off 25 cents a litre excise at the pump, the cost of living payment - they're all designed to help ease the pressure through this period". 

Finance Minister Grant Robertson, responding to the latest GDP results last week, said the Government's "economic plan is working in what continues to be an extremely challenging global environment".

Robertson. Photo credit: Newshub.

"We are continuing to focus on lifting New Zealanders up and giving them greater economic security," he said. "We are investing in supporting businesses to grow jobs and wages which will make families and our economy stronger.

"New Zealand is well placed to meet the next set of challenges confronting the global economy."