Consumer confidence back to pre-Covid level - except for Gen Z

Consumer confidence returns to pre-Covid levels. Photo / NZME

Consumer confidence has rebounded to pre-Covid levels, although younger consumers remain wary of big spending.

The Westpac McDermott Miller Consumer Confidence Index rose 1.9 points in the June quarter, taking it to a level of 107.1.

While that is still a little below average levels, it has now recovered most of the fall that followed last year's lockdown.

Households were spending more on entertainment activities, but there was still some
trepidation with regards to making major purchases for the home, the survey showed.

But while confidence among those aged over 30 is now back to about average levels, confidence among younger New Zealanders remains low.

"Those aged 18 to 29 are still very downbeat about the economic landscape," said Westpac senior economist Satish Ranchhod.

"Compared to other age groups, a larger number of young New Zealanders told us that their financial position has deteriorated over the past year".

Younger New Zealanders were also more concerned about the economy's
longer-term trajectory.

One factor that may have influenced this split in confidence was the ongoing restrictions on overseas travel, Ranchhod said.

"For many talented young New Zealanders, living abroad is a rite of passage and is
often a vital stepping stone in their careers. However, lingering health concerns mean that, in many cases, the traditional Kiwi OE is off the cards for the foreseeable future".

The other big factor that could be contributing to the split in confidence across age groups is the state of the housing market.

Despite the new policies announced by the Government in recent months, housing demand has remained resilient, and house prices have continued to rise at a rapid pace.

"New Zealanders hold a lot of their wealth in housing assets, and recent price gains are likely to have left many households feeling more optimistic about how their personal financial position is shaping up," Ranchhod said.

"That may be one reason why confidence among older New Zealanders (who are more likely to be homeowners) has bounced back faster in recent months."

Satish Ranchhod, senior economist at Westpac Bank. Photo / NZME

More broadly, Kiwis were feeling more optimistic about the outlook for the economy over the coming year, and they expect that their own financial situation will continue to improve.

In some cases, that lift in sentiment may have been reinforced by the Government's recent announcement that benefit levels will increase over the coming months, Ranchhod said.

The survey showed a sizeable lift in household spending on dining out and other
entertainment activities.

That was being seen across income and age groups, and in part reflected that instead of taking overseas holidays, many families have been spending up closer to home.

"That's helping to offset the drag on demand in the hospitality sector from the continued loss of international tourist dollars," he said.

The picture was more mixed with regards to larger household items.

The number of households that said it was a good time to make a major purchase was languishing at very low levels," Ranchhod said.

"Rather than signalling a reluctance to spend, we suspect this might reflect concerns about the availability of many consumer goods, with disruptions to global supply
chains continuing to be felt on local shop floors," he said.

"That's been a major hurdle that many businesses have been highlighting, while those retailers who have been able to source stock have actually reported solid levels of sales".