Inflation, Rates, Floods Weigh On Consumer Confidence

The Westpac McDermott Miller Consumer Confidence Index rose 2.1points to 77.7 but remained close to Q4’s series low and well below average. Even though both present and expected conditions rose moderately, confidence is likely to weigh on expenditure going forward as higher rates, the housing market correction and cost of living pressures continue to weigh on households. Depressed consumer confidence is likely to be another reason why the RBNZ is likely to slow hikes further to 25bp at its April meeting.

• Confidence in regions hit severely by recent extreme weather was very low.
• Financial pressures are weighing on households with the “current financial situation” component deteriorating to -31.8 from -30.9. However, “expected financial situation” improved to -3.8 from -12.6. Expected flood-related increases in food prices are likely to weigh on consumers’ finances further.
• The impact on households from 450bp of cumulative tightening is yet to be fully felt with around half of mortgages due to be refinanced from pandemic-low rates in the next year.
• Confidence is at depressed levels across age and income groups. They are also very pessimistic around the economic outlook.
• A “good time to buy” improved but remained depressed at -24.2 from -27.1 last quarter, as purchasing power deteriorated.