Consumer confidence no worse than during GFC, Westpac survey finds

Tuesday, 16 June 2020

Spending on most consumer items was up in May, over last year, but the recovery has been patchy..

Consumer confidence has fallen in the wake of Covid-19, but it hasn't so far dropped below the level seen during the depths of the global financial crisis, according to a Westpac survey.

The Westpac McDermott-Miller Consumer Confidence Index fell 7 points to 97.2 points.

Scores below 100 indicate that more people are pessimistic rather than optimistic about the economy in the coming year.

But the survey usually indicates some level of confidence, so a score below 100 is low.

The current results were based on interviews with 1556 New Zealanders who were polled between June 1 and June 10, a period when most Kiwis were anticipating and then experienced the switch from alert level 2 to alert level 1.

While the survey showed confidence at the lowest level since 2009, Westpac chief economist Dominick Stephens said the figures and other signs pointed to an economic fallout that might not be as bad as first feared.

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“Covid-19 has pushed the economy into a deep recession, and the related fall in consumer confidence will be a drag on spending,” he said.

“However, compared to previous large downturns, like the global financial crisis, the fall in confidence has actually been moderate.

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''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.”

The relatively moderate results of the confidence survey come in the wake of stronger-than-expected spending on bankcards in May.

Last week, Statistics NZ reported that card spending would have been up on May last year, had it not been for a continuing lull in spending on accommodation, takeaways and eating out.

Westpac still expected very weak economic growth and a big increase in unemployment over the coming few months.

However, it has revised down its forecast of peak unemployment to 8 per cent, from 9.5 per cent.

Confidence had fallen 12.7 points over the past two quarters, reflecting the considerable impact the pandemic had had on New Zealand,” Imogen Rendall, market research director at McDermott Miller, said.

Pessimism was more marked amongst older consumers and those on higher incomes. Only the 18 to 29-year-old age group remained optimistic, with little loss in confidence since the last quarter.

Rendall believed that with the pandemic far from over elsewhere, and ongoing restrictions on visitor arrivals, consumer optimism and spending would be dampened over the year ahead and possibly into 2021.