This despite a slight uptick in consumer confidence
A consumer confidence index has picked up a bit in June, but New Zealand households remain deeply pessimistic, as living costs and mortgage rates continue to squeeze their finances.
Westpac’s McDermott Miller Consumer Index lifted 5.1 points in June to 83.1, indicating that the number of households who are pessimistic about the economic landscape outweighs those who are optimistic by a wide margin.
In Westpac’s latest publication, Satish Ranchhod (pictured above), senior economist, said New Zealanders are most worried about financial pressures, with confidence still at low levels across all age groups, income brackets, and regions.
“Forty-three per cent of the households we spoke to in June told us that their financial position had deteriorated over the past year, while just 14% had seen an improvement,” Ranchhod said. “Furthermore, the majority of households expect that their financial position will continue to weaken over the year ahead.”
He said large increases in living costs and mortgage rates “are hitting every family in the country in the pocket,” and “have been especially tough on those families who are on lower incomes.”
On top of those concerns about their personal finances, the majority of New Zealanders were also expecting the economy to deteriorate over the next few years.
With the latest GDP figures showing a 0.8% contraction in the economy through the December and March quarters, Westpac economists expect economic growth to remain subdued over the course of this year as households and businesses continue to grapple with tougher financial conditions.
“The mounting pressure on household finances is already weighing on spending appetites,” Ranchhod said. “With financial headwinds continuing to mount, we expect that households will continue to rein in their spending over the coming months. That will be a significant drag on economic growth through the latter part of the year.”
In most regions, confidence slightly improved but remained weak, reflecting that the financial headwinds buffeting the economy are being felt by all households across the nation, Westpac economists said.
“Looking ahead, there’s reason to think that we could see a further rise over the coming months with some big shifts in the economic landscape already in train,” Ranchhod said. “Notably, the interest rate cycle is looking close to a peak.
“Consistent with that, we’re already seeing signs that the housing market is finding a base, with both house sales and prices rising over the past few months. In addition, the high rates of inflation that have been eating away at households’ spending power have started to moderate, and a further easing is on the cards over the coming year.”
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