The holiday season may soon be here but it appears New Zealand households are not actually feeling that festive, Westpac senior economist Satish Ranchhod says.
The Westpac McDermott Miller consumer confidence index has recorded a sharp drop of confidence in December and is now well below average.
Mr Ranchhod said it dropped five points in the December quarter to 107.4.
Given the suddenness of the drop, it was likely the outcome of September's election had a big impact on household sentiment.
The change in government signalled a different policy environment in coming years, including changes to family support payments, minimum wage levels, environmental policy and housing market policies.
``Against this changing backdrop, it's not surprising many households are a little apprehensive about how the economic environment will shape up over the next few years.''
Westpac's results were much more negative than those of the ANZ-Roy Morgan index released on Monday, which showed consumers still felt happy about their current financial situation and 32% said it was a good time to buy a major household item.
The latest Westpac index result identified a skew in confidence in income groups.
Confidence among households earning less than $70,000 a year, who were usually thought to be more likely to vote for centre-left parties, rose a modest three points in December, he said.
In contrast, confidence among households earning more than $70,000 fell sharply, dropping 10 points to below-average levels.
The change in Government had not been the only important development in recent months, Mr Ranchhod said. GDP growth had been slowing and some of the key drivers of economic activity in recent years had eased.
With those changes going in the background, it was no surprise New Zealand households were less confident about the economic landscape to come.
It was not just general economic conditions households were concerned about, he said.
Many were also worried about their financial situation. The number that expected to be better off financially in the coming year dropped to the lowest level since 2012.
``Importantly, this nervousness looks like it's putting a dampener on holiday spending plans. The number of households who think it's a good time to buy a major item has fallen sharply.''
Westpac had also seen a small drop in household spending on leisure activities such as dining out, Mr Ranchhod said.
Households were more likely to spend a cash windfall on savings and paying down debt.
The increased nervousness came on top of signs the migration cycle had turned. With big changes planned in the housing market, a period of weak house-price inflation was likely.
Together, the conditions signalled a softer environment for retail spending in the coming year, especially in areas like household furnishings, he said.
Confidence was down across all age groups but those aged between 18 and 30 reported the largest drop. Confidence among younger new Zealanders fell nine points in December and was well below its long-run average. Confidence among older New Zealanders was down only four points, he said.
Confidence was down among both women and men. Among women, it was down two points to about average levels but men were noting much more concern about the economic outlook.
Confidence fell sharply in metropolitan areas, perhaps relating to concerns about the strength of the housing market, Mr Ranchhod said.
Confidence among rural households had fallen only slightly, suggesting the Government's focus on regional development had outweighed concerns about environmental and regulatory changes among rural confidence.
