The Westpac-McDermott Miller New Zealand consumer confidence index decreased to 89.2 in Q1 2025, down from 97.5 in the previous quarter. Global trade tensions and persistent cost of living issues were identified as influencing factors.
A reading below 100 signifies a greater number of pessimists compared to optimists in consumer sentiment. The New Zealand dollar has seen minimal change following the announcement of these results.
Consumer Sentiment Under Pressure
Households are clearly feeling the pressure. A drop of over eight points in the index suggests a broad weakening in sentiment, likely tied to ongoing financial stress. Factors such as rising expenses and broader economic concerns appear to be weighing on consumer outlook.
Spending behaviour could shift as a result. When confidence drops to this degree, people often cut back on discretionary purchases, which in turn affects businesses reliant on consumer demand. Retailers and service providers may experience weaker sales numbers in the coming months, potentially feeding into earnings reports and growth forecasts.
Exchange rates remain steady for now, but that does not rule out movement in the near future. Currency markets typically absorb macroeconomic signals over time, rather than reacting in an immediate and uniform way. If sentiment continues to slide, investors may reassess their positions, particularly in relation to growth expectations.
For those with exposure to volatility, timing will be essential. Rapid swings in sentiment can trigger abrupt market adjustments, especially when combined with external factors such as trade uncertainty. Long-term positioning will require an awareness of not just domestic shifts but also broader global trends, particularly those influencing risk appetite.
Interest Rate Expectations
Interest rate outlooks could also see adjustments if weak confidence translates into economic softness. While policymakers weigh various factors when setting rates, subdued demand might lead to discussions around easing measures. Any signals on that front will likely prompt revaluations across financial instruments sensitive to borrowing costs.
Global trade frictions remain another core consideration. If tensions escalate, sentiment could take further hits, reinforcing the cautious tone seen in this latest confidence reading. Markets tend to move in anticipation rather than reaction, meaning positioning ahead of any policy shifts will require careful observation of both economic data and geopolitical developments.
The quarter ahead presents a setting where short-term moves could be sharp, depending on how sentiment translates into real-world activity. Monitoring consumer behaviour, central bank rhetoric, and external pressures will offer clarity on possible adjustments in trajectory.
