Retail card transactions have grown for the first time in seven months, although economists say the effect of tax cuts and government stimulus are yet to benefit Kiwi wallets.
New data from StatsNZ shows that retail spending increased for August by 0.2% or $10 million, while non-core retail spending increased by 0.4% or $25m.
However, total card spending including services and non-retail fell by 0.2% for August, down $16m.
Total retail spending (excluding services and non-retail) is down by 2.9% compared to last year.
Retail NZ chief executive Carolyn Young said that while there was traditionally an increase in retail sales for August, the devil was in the details.
“While we are happy to see a small uplift in August compared to July, it is still worrying that year on year there is a sizeable decrease. We are certainly hoping that cuts in interest rates and a lift in consumer confidence will result in a turnaround before Christmas,” Young said.
Satish Ranchhod, senior economist at Westpac, said that although the result was good news for retailers, it was lower than expectations, with Westpac forecasting retail spending growth of 0.7% before the release.
“We expected that tax cuts would support a larger rise in spending. However, New Zealand households are yet to throw their wallets open,” Ranchhod said.
“Importantly, with the vast majority of New Zealand mortgages fixed for a period, it will still be several months before many households feel relief from falling interest rates. At the same time, the softening labour market means many households are still cautious about their spending.”
He predicts that spending will pick up over the rest of the year as households start to utilise the stimulus they have received.
ASB chief economist Nick Tuffley agreed that spending was subdued for the month, but looked to economy-wide issues as points of concern.
“The key driver for consumer spending will be the economic outlook, especially the labour market. The prospects for card spending also rely on the net migration picture and improvements in the tourism sector, which look unlikely based on recent trends,” Tuffley said.
He expects the Reserve Bank of New Zealand to further ease monetary policy in light of the small impact of the OCR cut on household spending.
Restaurant Association chief executive Marisa Bidois was disappointed with the result but was hopeful to see a boost to spending in the lead up to summer.
“While the industry is undoubtedly facing challenges, we continue to see extraordinary determination from our members. We’ve weathered tough times before, and while the trading environment remains difficult, we are prepared to face these challenges head-on and are focused on surviving until 2025 and beyond,” Bidois said.
Breaking down the data by sector, the biggest growth was in apparel spending, up 2.1% or $6.6m for August.
Elsewhere durables, services, and fuel saw slight increases, up in August by 0.5%, 0.2%, and 0.1%, respectively.
Car sales had the biggest decline for the month, down 1.5% or 2.9%.
Another area that has been hit hard recently is hospitality, which declined by 0.2% or $2.3m for August.
Across August there were 164 million card transactions with a total amount spent of $9 billion.
Cost-of-living still sticking
Last month the StatsNZ Retail Trade Survey was released showing retail sales declined for the past three months.
Seasonally adjusted retail sales dropped 1.2% in the June quarter compared with the March quarter, amounting to $24 billion.
That was the eighth consecutive quarter to see a drop, reflecting the still-present cost-of-living pressures on customers.
Eleven of the 15 industries had lower sales in the June quarter compared with the March quarter.
Sales in motor vehicles and parts and food and beverage services were down, with electronics down the most at 6%.
Supermarkets, pharmaceuticals and “other” store-based retailing were the exceptions, with sales up 2.1% and 3.2% respectively.
Regional sales saw drops across the board, with 14 of the 16 regions seeing a decline, StatsNZ said.
As for sales per person, it fell 1.5% in the June quarter, the 10th consecutive quarterly decline after seasonal and inflation adjustments.
StatsNZ business financial statistics manager Ricky Ho said retail sales volumes had continued to decline over the past two and a half years.
“The last time we saw several quarters of consistent falls was between 2007 and 2009, which coincided with the global financial crisis,” Ho said.