Consumer confidence plummets to lowest level in three years

11:01 am today

Confidence fell across the board among both men and women.

Photo: GOLUBOVY

Consumer confidence has fallen sharply in the past quarter, as higher fuel and energy costs squeeze household budgets.

The Westpac-McDermott Miller Consumer Confidence Index dropped by 14.3 points to 80.4 - its lowest level in three years.

A reading below 100 indicates more households are pessimistic about economic conditions than optimistic.

Westpac senior economist Satish Ranchod said the pressure on household finances had spiked in recent months.

"The cost of essentials like petrol and electricity has skyrocketed," he said, "along with mortgage costs pushing higher.

"The resulting squeeze on households' finances has been a drag on spending."

Confidence fell across the board among both men and women, with half of women seeing themselves as worse off financially than a year ago, compared with two in five men.

Looking ahead, McDermott Miller market research director Imogen Rendall said one third of households expected to be worse off next year - the most pessimistic result in three years.

"Just over a quarter of those in paid work expect to be better off financially in a year's time, compared with just one in seven of those who are not in paid work," Rendall said.

The report showed a net 38 percent of households have cut back spending on dining out and other entertainment, the weakest result since 1991 - echoing reports of tough trading conditions from hospitality operators in recent months.

Confidence fell in every region across the country, with Canterbury showing the smallest drop, as continued strength in the dairying sector helped insulate the region.

Wellington remained the most pessimistic part of the country, due to rising living costs, a softer jobs market and announced public sector job losses.

Relief on the horizon

Ranchhod said some relief may be on the horizon, following an agreement to extend the ceasefire in the Middle East this week, which has already pushed global oil prices and local petrol prices lower.

"While domestic cost pressures remain elevated for now, the recent easing in global tensions could pave the way for a recovery in confidence and firming in economic activity through the back part of the year."

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