Consumer confidence was still languishing at very low levels, a Westpac economist said. Photo:
Consumer sentiment has lifted from its record low but is still hovering around levels last seen during the global financial crisis.
The Westpac McDermott Mill Consumer Confidence index for the three months ended September rose 8.9 points to 87.6, which is where sentiment was during the GFC.
Any reading above 100 indicates optimism, while anything below signals pessimism. The index had a long-run average of 110.
Westpac senior economist Satish Ranchhod said the higher headline result was likely due to the easing of Covid-related restrictions and better than expected economic growth.
"Nevertheless, confidence is still languishing at very low levels.
"Households' finances are being squeezed by the rise in living costs and higher mortgage rates."
The pressure on household budgets has been especially pronounced for those on lower incomes, Ranchhod said.
A net 13.3 percent of people thought it was a bad time to buy a major household item, a near 12-point improvement on the previous survey.
The number of people who said they were worse off financially declined, as did the proportion of respondents who expected to be worse off in a year's time.
Looking ahead, Ranchhod said the pressure on households would likely increase.
"The Reserve Bank has been hiking the Official Cash Rate at a rapid pace, and further large increases are on the cards before the end of this year.
"We're forecasting further softness over the next few months, especially in areas like durables spending."
Consumer confidence was low across almost all age groups, with the sole exception of those aged 18 to 29 whose sentiment had rebounded to levels last seen prior to the pandemic.
The strength of the labour market was benefitting this cohort the most, Ranchhod said.
"Younger workers typically change jobs more often. And with the labour market the tightest it's been in decades, many of those in the early stages of their careers will have found that their skills are in hot demand."
Younger people were also less likely to be homeowners, which meant they were not faced with declining house prices or higher mortgage rates, he said.
Confidence was low across the country except for Waikato, where stronger prices for agricultural exports had boosted sentiment, and Wellington, due to its "extraordinarily" tight labour market.