Consumer confidence drops in survey but glimmers of hope further out

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Consumer confidence has fallen to its lowest level in more than a decade, but there are signs the Covid-19 recession may not be as severe as feared.

Shopping mall Sylvia Park in Auckland during level 2.

Shopping mall at Sylvia Park in Auckland during level 2. Photo: RNZ / Matthew Theunissen

The Westpac McDermott-Miller survey, taken as the economy was coming out of lockdown, showed confidence falling seven points in the three months ended June to 97.2, the deepest level of pessimism since 2009.

The biggest fall was in short-term sentiment with respondents most pessimistic about the economic outlook for the next 12 months and their own financial position.

However, they remained positive about their own outlook and the five-year outlook for the economy.

“Compared to previous large downturns, like the Global Financial Crisis, the fall in confidence has actually been moderate. That’s likely to reflect New Zealand’s success in limiting the spread of the virus and the earlier than anticipated easing of lockdown restrictions,” Westpac chief economist Dominick Stephens said.

He said the economy faced recession and a sharp rise in unemployment because of the pandemic and the resulting lockdown.

Stephens said consumer nervousness about the impact on their own situation and the broader outlook would be a brake on spending, as shown by the number thinking it was a good time to buy a big ticket item which has fallen to its lowest level in more than a decade.

“This weakness in spending appetites points to the risk of renewed weakness in parts of the retail sector.”

Confidence was weakest among those earning more than $50,000 a year, and the elderly.

The biggest regional fall in sentiment was in Wellington, which had been one of the most confident in the March survey. The most pessimistic regions were the top of the South Island and the West Coast.

Regions relying on farming and horticulture remained optimistic, with confidence rising in Gisborne, Hawke’s Bay, and Southland.

Official growth numbers are due on Thursday and are expected to show a 1 percent fall in economic output for the first three months of the year.

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