Rock-bottom consumer confidence has increased concerns about a possible recession.
Photo: Unsplash / Clay Banks
The Westpac McDermott Miller Consumer Confidence Index out today shows consumers have never been as hesitant - since the survey began 34 years ago.
The index fell 13 points in the June quarter to just under 79 - confidence was higher, during the recession of the early 1990s, and the Global Financial Crisis in 2008/2009.
Infometrics principal economist Brad Olsen expected the index results to be bad, but not that bad.
"It sends a much stronger signal than - just a risk of a recession - it does say that odds on now, are a recession. It's a question of when, not if.
"The fact that it [the index] is at its lowest on record by a considerable margin as well - is grim reading for the economy.
"It's actually quite shocking just how bad households currently think things are and how bad households think things are going to get."
Infometrics principal economist Brad Olsen Photo: Supplied / James Gilberd Photospace
He said the survey rang "serious alarm bells".
"Realistically, it does start to say 'wow'. This has turned a corner, after two years of the pandemic, a lot of stimulus spending to keep the economy going, we are very much at a point where the economy looks like it's turning."
Minister of Finance Grant Robertson was not reading into the index, as much, today.
"You know, the old story, you put 10 economists in a room and you get 13 opinions," he said.
"Clearly, the pressures are going on longer, because the war in Ukraine is going on longer. The supply chain situation is still difficult, although there are some improvements in that area. But this is going to be a tough 2022."
File photo: Finance Minister Grant Robertson Photo: RNZ / Samuel Rillstone
He disagreed with recession predictions.
"That's still not the forecast that we're receiving. Obviously, internationally, there is concern about recession in different countries. But the consensus forecasts remain that that's not the case. But those forecasts get updated regularly now."
Today's results show the 1559 people surveyed were mostly worse off than they were three months ago, and most people thought economic conditions would be bad in the next year, and the next five years.
The number of people who thought it was a good time to buy a big household item fell nearly 17.9 percentage points.
Retail NZ chief executive Greg Harford said sales for members were "rocky".
"Our members are telling us through our Retail Radar research that they're not confident that they're going to be hitting their sales targets. Many are not confident that they're going to be here in 12 months at all."
File photo: Retail NZ chief executive Greg Harford Photo: Supplied
Westpac senior economist Satish Ranchhod agreed.
"Retail is going to be facing a lot of pressure over the coming months. We're seeing pressure on household budgets, that's dampening spending. We're also seeing no relief on the cost side."
Auckland-based business Eurotech Design imports and distributes appliances.
Managing director Sophia Bristow had seen sales lower this year but she said it was unclear whether it would take months or years to improve.
"We are hoping for a short and sharp correction and a softer landing. You know, we've got to be mindful that we do not talk ourselves into a recession."
At the same time, freight costs had gone up significantly over the pandemic, the business' purchase costs had gone up, and it had been affected by labour shortages in Aotearoa.
"We had no choice, and we were very reluctant to actually pass the [cost] increase on to our customers.
"We're very fortunate and continue to count our blessings. Because we operate in that essential part of the market. People will always need a washing machine or dryer because we're coming into the winter season. If your oven or dishwasher breaks, you definitely want to have that replaced."
The Westpac index said consumer confidence had likely dropped because of increased costs of living, such as rising rent, food, and petrol prices, as well as rising mortgage rates.
The index showed Southland, Auckland, Northland, Canterbury and Waikato had the biggest drops.
But there were two regions bucking the trend - consumer confidence was up 2.5 points in Wellington, and nearly 9 points in Gisborne and Hawke's Bay, in the June quarter.