Consumer confidence hits the skids in March, across all genders, ages and places

Wednesday, 19 March 2025

People will be keeping their wallets closed for a few months longer, today’s report suggested.

Global tensions outside the house and financial pressures inside it are taking an axe consumer confidence levels, with an 8 point fall in March reversing some of the gains seen from mid-2024 when interest rates started to be cut.

The survey of 1550 people who are asked asked to indicate their savings, investment and spending intentions, forming the Westpac-McDermott Miller Consumer Confidence Index, found the substantial drop across all age groups, genders and places, particularly in Wellington.

The drop followed a gradual gain in months prior to that.

The index has been below 100 since 2022. A score above 100 shows more optimism than pessimism, and vice versa for a score below 100. In December 2024 sentiment had just about broken through into optimism, at 97.5, but the March 2025 reading plunged the index back down to 89.2.

“The past few weeks have seen increased trade tensions and related volatility in financial markets. That’s casting a shadow over the economic outlook and adding to uncertainty for New Zealand households,” said Westpac Senior Economist Satish Ranchhod.

Westpac senior economist Satish Ranchhod said geopolitics was feeding into sentiment.

Financial pressures were also continuing to be felt, he said.

“While inflation is now finally back close to 2%, many of us are still grappling with the big increases in living costs over the past few years that have eaten away at our spending power.

“Furthermore, we’re still seeing large increases in the cost of essentials like food and local council rates. In the face of that ongoing squeeze on their spending power, it’s no surprise that many households still feel like they’re going backwards.”

While household confidence levels had been trending higher over the past year, on the basis of various economic predictions of an economy that would be showing green shoots at by the back end of 2025, there would likely be a brake on spending for the next few months at least.

Agricultural areas in the very south of the country stood out slightly from the herd, displaying more confidence.

Breakdown

March’s fall in confidence was seen across all age and income groups, and confidence was especially low in Wellington, or “in the doldrums” as the report had it, where financial headwinds and a tightening up of public spending were key concerns.

“In contrast, households are more optimistic in regions that have a strong rural backbone or tourism ties, especially in the lower South Island,” said Ranchhod.

But the level of pessimism had increased across all demographic groups, with both men and women’s confidence dropping. Only two in ten men and fewer than one in ten women expected good economic times in New Zealand over the next year, said Imogen Rendall, market research director at McDermott Miller Limited.

All age groups had also seen a drop in confidence this quarter. Confidence amongst those aged 30-49 has fallen the most, sinking 16.8 points to 86.5. Younger people aged 18-29 remain the most confident with an index score of 100.5, still a drop of 5.7 points from last quarter, and those aged 50+ have also seen a reduction in confidence of 3.2 points to 85.7.

“Two in five of those in paid work feel they are worse off financially than a year ago, while almost half of those who are not in paid work feel this way,” Rendall said.

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Geopolitics

When the March survey was being conducted, the US began tightening trade restrictions and there were growing concerns about how a tougher environment for global trade could negatively impact export incomes and the exchange rate, today’s survey report said.

“Although New Zealand hasn’t been specifically targeted with trade restrictions, we are affected by the blanket tariffs on items like steel and aluminium. And there is a risk we do get caught up in the broader tightening of US trade regulations, especially if the US imposes wide reaching restrictions on agricultural imports or if the global economy turns down.

Importantly, the tariff war isn’t just an issue for exporters or businesses. The past few weeks has seen volatility in financial markets and sharp falls in equity markets, including in New Zealand. New Zealand households may be feeling the impact of that through their KiwiSaver balances and other financial holdings. And we’re likely to see more volatility over the coming months.”

Against this backdrop, households reported their personal financial situations had deteriorated in the year. While inflation had slowed, there were large increases in the cost of essentials like food and local council rates. 27% of the households that participated in the survey said they had reduced their spending on activities like dining out or in bars over the past year, and there had been a fall in the number of people who think it’s a good time to purchase a major item for the home.

There had been some good news however - around half of all mortgages will come up for re-fixing over the next six months, giving borrowers the chance to secure a much lower interest rate when they next re-fix their mortgage.

“While it will take time for those lower interest rates to ripple through the economy, we expect that will support a lift in confidence and spending through the latter part of the year,” the report authors said.