Consumer confidence fell to a 17-month low in March as inflation fears and rising petrol costs gripped Kiwis amid the Middle East conflict.
The latest ANZ-Roy Morgan Consumer Confidence index dropped 8.8 points from 100.1 in February to 91.3 in March.
A score below 100 indicates more pessimists than optimists.
The proportion of households thinking it’s a good time to buy a major household item (the best retail indicator) fell 10 points to -14.
Meanwhile, inflation expectations jumped a full percentage point to 5.7%, the highest level since March 2022.
ANZ chief economist Sharon Zollner said it was a challenging time for many.
“The conflict in the Middle East has created significant uncertainty for the economic outlook and is hitting people in the back pocket already,” she said.
“Confidence impacts are likely to exacerbate the impact on growth, but it is entirely reasonable that both firms and households think twice when making spending decisions in case things take a marked turn for the worse.”
Zollner said the “sharp rise” in inflation expectations was unsurprising.
“The 2021 experience demonstrated just how much people hate inflation – confidence tanked as inflation soared to 7.3% even with a booming economy, labour market and housing market,” she said.
Earlier this month, Finance Minister Nicola Willis revealed Treasury’s “worst-case” scenario, which assumed a long conflict, was for inflation to rise from 3.1% now to a high of 3.7%.
The war, which has seen Iran effectively close the Strait of Hormuz to oil tankers, has caused petrol prices to surge in New Zealand.
Zollner said petrol price increases were presumably behind the current conditions index falling from 90.0 to 83.1 in the latest ANZ-Roy Morgan Consumer Confidence survey.
A net 10% of respondents said they expect to be better off this time next year, down 10 points from February’s survey.
Zollner said while confidence took a hit in New Zealand, we are still much cheerier than those in Australia.
“Consumer confidence has been more fragile in Australia for some time, even as their economic growth has outpaced New Zealand’s.”
Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.