The Westpac McDermott Miller Consumer Confidence Index for December has dropped to its lowest point in more than 30 years, adding to a growing list of indicators that are pointing to an economic slowdown.
The index dropped by 12 points to 75.6 in December - its lowest point since the survey began in 1988.
Westpac said the survey indicated that there are far more New Zealanders who are pessimistic about the economic environment than those that are optimistic.
“Households’ finances are being squeezed as we head into the holiday season,” Westpac’s acting chief economist Michael Gordon said.
“As well as increases in borrowing costs, the sharp rise in consumer prices is eating away at households’ spending power,” Gordon said.
There had been particularly large increases in the cost of food, housing, and petrol prices over the past year.
Consistent with that, the downturn in confidence had been widespread across age groups, income brackets and regions.
“Importantly, for large numbers of households, the pain is still ahead of them,” Gordon said.
“Many borrowers are still on the very low mortgage rates that were on offer in the early stages of the pandemic.
“However, around half of all mortgages will come up for repricing over the next 12 months. In many cases, borrowers will face refixing at substantially higher interest rates,” he said.
Spending will continue to weaken over the year ahead as borrowing costs continue to push higher, Imogen Rendall, market research director of McDermott Miller said.
“This time of year often brings with it an uptick in confidence, as New Zealanders look forward to the festive season and a long summer stretching ahead of them. Instead, there are no good news stories this Christmas, with consumer confidence at its lowest point since the Westpac McDermott Miller survey began,” Rendall said.
Many respondents expect bad economic times ahead, not just over the next 12 months but for the next five years, she said.
They are not only worse off financially than a year ago, they expect their personal situation to further deteriorate over the next year.
“With households expected to come under even more financial pressure in the New Year, it remains to be seen how much further confidence might fall,” Rendall said.
The survey follows data out last week that showed the economy grew by 2.0 per cent in the September quarter, led by the services sector, and well over market expectations.
BNZ senior economist Doug Steel said that, as it stands, economic activity is running well above potential.
“There is still considerable pressure on the ability to supply goods and services that are in big demand, but the feeling is that the trajectory of it is falling,” he said.
“The forward indicators - including the likes this (Westpac-McDermott Miller survey) one, show the outlook is for slower growth, and/or negative growth over the coming 12 months or so,” he said.
“Confidence has been low quite low for some time, but spending - at least up until recently - has been robust,” Steel said.
Other second tier indicators have pointed to slowdown.
Expansion levels for New Zealand’s services sector eased in November, according to the BNZ - BusinessNZ Performance of Services Index (PSI).
The PSI for November was 53.7 - down 3.4 points from October, and the lowest level of overall activity since April 2022.
Last week, data pointed to a contraction in the manufacturing sector over November.
The BNZ - BusinessNZ Performance of Manufacturing Index - the seasonally adjusted PMI for November was 47.4 - 1.7 points lower than October.
It was the first time the PMI has shown consecutive months of contraction since the first nationwide lockdown in 2020.
BusinessNZ’s director, advocacy Catherine Beard said that overall activity levels in New Zealand were now starting to mirror the global trend of contraction, which may indicate a tough start to 2023 for manufacturers.