Consumer confidence has rebounded sharply in December, according to the latest Westpac consumer confidence survey.
"New Zealand households have regained their festive spirit," said Westpac Senior economist Satish Ranchhod.
The Westpac McDermott Miller Consumer Confidence Index rose 10.9 points in December to a level of 106.
"While that rise still leaves confidence a little below its long-run average, it has reversed the falls that we saw earlier in 2020 in the wake of the Covid-outbreak," Ranchhod said.
Spending appetites were on the up as we headed into the holiday season.
"Notably, there has been a sharp rise in spending on dining out and entertainment," he said.
"After a tough year, many New Zealanders are in the mood to hit the town or catch up with friends and family. Plus, with overseas holidays still off the cards, many families are taking the opportunity to head out and explore the country."
It was a more of a mixed picture when it came to spending on durables. Over the past few months, household spending had risen on furnishings and other household items.
"However, when we asked about their spending plans, the number of households who thought it was good time to make a major purchase remained quite low in December," Ranchhod said.
"Rather than signalling a reluctance to spend, we suspect this might reflect concerns about the availability of many consumer goods, with widespread reports about shipping delays in recent weeks."
Increasing optimism around the economic outlook was underlying the lift in household sentiment, he said.
Domestic economic activity rebounded and there are signs of growing momentum as we head towards the new year.
"Most importantly, recent weeks have also seen increasingly positive news regarding vaccines," Ranchhod said.
"Together, those developments have left households feeling much more optimistic about the state of the economy over the next few years."
New Zealanders were also feeling more secure about their personal financial position.
Another big factor likely to have affected household confidence was the strength of the housing market.
Mortgage rates had fallen to record levels in recent months and house prices have been rising at a rapid pace across the country.
"New Zealanders hold a lot of their wealth in housing assets, be that the family home or some form of investment property," Ranchhod said.
"Consequently, recent price increases are likely to have left many households feeling more optimistic about how their personal financial position is shaping up."
Confidence was up across all regions. It was highest in Gisborne, Hawke's Bay, Wellington, Bay of Plenty, Northland and Auckland.
It was lowest in Otago and Canterbury.