“That may well have been a contributing factor to the improvement in confidence, along with generally improving headlines about the state of the economy and the outlook for the year ahead.”
Inflation expectations eased from 5.2% to 4.6% in December, but the figure remains much higher than Consumers Price Index inflation (3%).
Zollner said in recent years there has been a strong negative correlation between inflation expectations and consumer confidence.
Meanwhile, the proportion of households thinking it’s a good time to buy a major household item (seen as the best retail indicator) rose 8 points to -1.
“This indicator hasn’t been positive in more than four years but is knocking on the door,” Zollner said.
A net 22% of respondents said they expect to be better off this time next year, up 1 point to the highest level since April.
But the proportion of people who currently feel better off than last year is still very soft, rising 1 point to -18%.
“The proportion of people who feel better off than a year ago hasn’t budged yet. That’ll come, but the labour market does typically lag the activity cycle by around six months,” Zollner said.
Earlier this week, the Westpac McDermott Miller Consumer Confidence Index rose to its highest level for the year, up 5.6 points to 96.5 for the December quarter.
This still remains in pessimistic territory and around the levels seen last December.
The proportion of people who said they expect economic conditions would improve over the coming year reached its highest level since 2021, rising 6.6 points 103.4.
“While we often see a lift in households’ spirits at this time of year, there is reason to expect some of that Christmas cheer will continue into 2026,” Westpac senior economist Satish Ranchhod said.
“We’re starting to see some more encouraging signs in the economy, and hopefully 2026 will be a more positive year for most New Zealand households.”
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.