New Zealand consumer confidence took a hit following the recent federal election, according to the latest Westpac McDermott Miller Consumer Confidence Survey.
The headline consumer confidence index fell 5 points to 107.4 in the December quarter, leaving it below its long-run average of 111.4.
Despite the sharp quarterly decline, a reading above 100 indicates that optimists continue to outnumber pessimists, maintaining the pattern seen in recent years.
As seen in the table below, confidence weakened across the board, particularly when it came to sentiment towards the near-term economic outlook.
“The drop in confidence appears to be partly a response to the change in Government,” said Westpac following the release of the report.
“Households are concerned about the general economic environment and their personal financial situation. This will put a dampener on spending plans ahead of the holidays.”
While overall confidence levels fell, Westpac said there were some interesting underlying trends in the December quarter survey with confidence among well-off Kiwis falling substantially, offsetting an improvement in sentiment in lower income households.
Another reason why we think the election has had a big impact on household sentiment is the skew in confidence by income group.
Confidence among those households earning less than $70,000 per annum (who are usually thought of as being more likely to vote for centre-left parties) actually rose a modest 3 points in December. The lift in confidence among these households may have something to do with the range of measures that the new Government is planning on introducing as part of its Families Package, such as increases in Working for Families payments and the accommodation supplement.
In contrast, confidence among those households earning more than $70,000 per annum fell sharply – dropping 10 points to below average levels.
There was a similar split by demographics with confidence among younger Kiwis, and among men, falling substantially more than in older age brackets in the latest survey.
While confidence is down across all age groups, it was younger New Zealanders (those aged 18 to 30 years) who reported the biggest drop. Confidence among younger New Zealanders fell 9 points in December, and is now well below its long-run average. In contrast, confidence among older New Zealanders was only down around 4 points. Like other groups, younger New Zealanders are nervous about the economic outlook. However, they are also reporting that they’re concerned about their personal financial situation.
Confidence is down among both women and men. However, while confidence among women is only down 2 points to around average levels, men are noting much more concern about the outlook for the economy over the next few years. This has seen confidence among men fall by 7 points in December, leaving it at below average levels.
Looking at the geographic breakdown of consumer confidence, we’ve seen particularly sharp falls in metropolitan areas, with households in these areas noting increased concerns about the strength of the economy over the coming year. This may be related to concerns about the strength of the housing market, with the new Government planning to roll out a suite of policies over the next few years to dampen housing market pressures.
Confidence has also fallen among rural households, but only slightly. This is interesting as it suggests that the new Government’s focus on regional development has outweighed concerns about environmental and regulatory changes among rural confidence.
The New Zealand dollar has softened modestly following the release of the report, trimming its gain for the session to 0.07%. The NZD/USD currently sits at .6994, down from a high of .7028 struck in earlier trade.