Photo: RNZ / Rebekah Parsons-King
A retail industry group says businesses are shuting up shop as customers worry about their spending.
The Westpac McDermott Miller Confidence survey shows consumer confidence dropped 11 points in June to 82.2, wiping out the past six months of gains.
A confidence level of below 100 signals households are pessimistic about the economy.
On the business side, the retail sector is probably seeing the worst conditions in modern memory with consumers spending only on things they really need rather than what they want, an expert says.
Measures of consumer confidence and spending are at multi year lows, with retailers reporting falling sales, tight margins, and reduced profits.
First Retail Group managing director Chris Wilkinson says the downturn in consumer sentiment will be no surprise to retailers, not just in New Zealand but around the world.
"Talking to multi generational retailers and retailers running very large businesses here and overseas, we've had conversations that this is without a doubt the most challenging time that we've seen in modern memory."
On Tuesday the country's biggest listed retailer the Warehouse Group announced a back to basics restructuring and management shake up to concentrate on its main brands.
Wilkinson said The Warehouse's efforts to slim down its top management and offer a greater range of basic items to consumers was the right way to go.
Carolyn Young says retailers can't absorb the extra costs. Photo: Supplied
Retail NZ chief executive Carolyn Young told Morning Report consumers and households were uncertain about the job market, housing and their ability fund new expenses.
"When you look at the graphs, they're probably slightly worse than '87 when it took a long time for us to recover from the crash way back then."
Young said she was hearing of some in the Retail NZ membership closing their businesses.
As prices rise, including increases in insurance and freight, retailers were unable to absorb extra costs because the margins were really small, she said.
"It really is about surviving till '25, it's how do you get through this next six to eight months and then hopefully we see confidence turn around because whilst the economy's going to take time to change...we actually need consumer confidence and business confidence to turn around..."
Young said businesses should remember customer service was key and look at how they can be agile right now within the current constraints.
And that cash was king.
"If you've got some cash then you can get through."
Consumer confidence drops in Westpac survey
Business leaders in two of the country's biggest cities say people aren't spending and local businesses are floundering.
Business Central chief executive Simon Arcus said it was worrying times.
"You had 46 empty shop fronts at the end of last year on the golden mile, and so really, retailers are finding it really difficult.
"And of course it's a city that depends on the government's relationship with so many of these businesses to make sure that business is healthy, so worrying times."
There was a bump in optimism after the election "because it is a more pro-business government".
"But of course then the reality or the hangover as you say...was that the economy is weak and needs to strengthen and the cuts of course have just been a bit of a pessimistic feel."
Public sector cuts were a contributing factor though it's meant more availability in the private sector and people dropping their salary expectations.
It would be a tough winter, he said.
Business leaders say people aren't spending
In Canterbury, there was pressure Business Canterbury chief executive Leanne Watson said.
Watson said inflationary pressure and rising interest rates were the top issues for businesses, followed by the easing demand for consumer confidence.
"It's pretty tough out their for businesses at the moment."
Cost pressures were starting to bite, she said.
"We're talking about 40 percent of our members we surveyed saying that they're now having major impacts across their business and of course some of those costs that are lingering from the Covid days. We're seeing higher wage growth, those costs are now baked into business so we're seeing an easing in demand and we're seeing those costs that have been much higher over the last few years and those things together, along with really high interest rates are just having a significant impact."
It wasn't all doom and gloom though, she said.
Everyone had a close eye on whether interest rates would ease back a bit sooner than predicted and 72 percent of the businesses surveyed were pretty confidence they could manage disruption.