Consumer confidence still low as high food, borrowing costs eat into optimism

A Westpac economist says big increases in living costs, especially for necessities like food, are hitting families hard. Photo / Getty Images

A consumer confidence index is up, but economists aren’t popping the champagne because sentiment is still well below average.

Today’s Westpac McDermott Miller Consumer Confidence survey found pessimistic households greatly outnumbered the optimists.

“More than 40 per cent of households have told us that their financial position went backwards over the past year, while only 14 per cent said that their financial position had improved,” Westpac senior economist Satish Ranchhod said.

“Large increases in living costs, especially for necessities like food, are hitting every family in the country in the pocket.”

He said higher borrowing costs were also hurting many households.

“Those factors are squeezing households’ finances and are constraining spending in the economy.”

Ranchhod said although inflation was still high, it was at least past its peak and likely to continue easing over the year ahead.

“Even so, many households will still be facing strong financial headwinds over the remainder of this year.”

The survey found consumer confidence was up this quarter.

But more than 40 per cent of respondents expected bad economic times ahead for New Zealand in the next 12 months.

And a quarter of respondents expected their own financial situation to worsen.

“It looks like the overwhelming feeling of pessimism amongst consumers is going to remain for the foreseeable future,” said Imogen Rendall, McDermott Miller Limited market research director.

She said men’s confidence has increased this quarter but women remained more pessimistic.

“While both men and women are similarly concerned about their personal and household finances, both past and future, men are more optimistic about New Zealand’s longer-term financial prosperity,” Rendall added.

The survey was conducted in the first 12 days of June, with a sample size of 1560.