91¶¶Òù

IBISWorld forecasts consumer sentiment to tumble by 17.7 points in 2026-27, to average 79.2 index points. The outbreak of war between Iran, Israel and the US in early 2026 has upended supply chains, most critically creating fuel shortages, particularly for diesel and petroleum. NZ Stats has noted this as the primary driver behind higher inflation in the March 2026 quarterly inflation figures. This is negatively impacting consumer spending, eroding spending power and directly undermining consumer confidence. The lack of fuel security and the return of higher inflation have raised fears of a return to rate hikes, pulling the carpet out from under an otherwise recovering consumer sentiment index.

After being struck down by the pandemic, consumer sentiment was poised to recover from 2021-22 as restrictions eased. However, the onset of the Russia-Ukraine war and the logjams it brought to global supply chains halted momentum. Rapid inflation called for monetary policy tightening, leading to cash rate hikes. These factors created a cost-of-living crisis and kept consumer sentiment well below the neutral level of 100 for most of 2022 and 2023. By late 2024 and into 2025, consumer sentiment showed signs of improvement from its 2022-23 lows, reflecting moderating inflation and the start of interest rate cuts that eased pressure on mortgage-paying households. Nevertheless, consumers remained wary as unemployment started to creep back up over the three years to 2025-26 in a softening job market, subduing index growth.

A new war, this time between Iran, Israel and the United States in early 2026, erased hopes of continued economic growth and lower inflation. The RBNZ noted that in the near term, inflation was set to spike once again, with economic recovery expectations weakened. This contributed to a more than 10 basis point drop in consumer sentiment between March and April 2026. Consumer sentiment will bottom out throughout 2026-27. This is in part helped by the RBNZ not lifting rates like it did at the beginning of the Russia-Ukraine war, noting that at the time demand was growing strongly, whereas at the time of the Iran-Israel-US war, growth was already slow, justifying the decision to hold the cash rate steady at 2.25%, preventing a larger drop in consumer sentiment.

Overall, 91¶¶Òù estimates that consumer sentiment will decline at an average annual rate of 4.5 index points over the five years through 2026-27, highlighting that persistent cost-of-living pressures and global uncertainty have left a lasting mark on consumer confidence. Conditions in 2026-27 are similar to levels seen at the late 2022 trough.