Spending was down in all but one category in June. Fuel spending dropped 4.6% ($24m), durables fell 0.5% ($8.2m), hospitality was down 0.5% ($6.6m), motor vehicles (excluding fuel) fell 2.8% ($5.3m) and apparel was down 0.8% ($2.4m).
Consumables spending rose 0.5% ($12m) in June compared with May.
Annually, retail spending fell 4.9% and core retail spending was 3.8% lower.
“Yet again, electronic card transactions paint a bleak picture of private demand in New Zealand,” Mundy said.
“The cumulative impact of past monetary policy tightening and growing job insecurity fears are playing out clearly in the retail space.”
Mundy said the rubber (tight monetary policy) was starting to hit the road.
“Recent data have highlighted that the economy is weakening rapidly.
“More recently, growing capacity in the labour market is the latest downside risk to economic activity and suggests that prices will return to the RBNZ’s 1-3% inflation target soon.”
She said one caveat was how consumers responded to the July 31 tax changes.
However, the bank was still expecting a cut of 25 basis points (bps) to the Official Cash Rate in November.
“The evident weakness in the economy and easing pricing pressures should give the RBNZ the confidence that monetary policy can be eased,” Mundy said.
“But there is a risk that a larger 50bps of cuts are delivered this side of Christmas.”
Westpac senior economist Satish Ranchhod said the downturn in retail spending had been deepening as many households kept their wallets firmly shut.
“Over the past year, households have seen their spending power squeezed by the continued rise in living costs and the related increases in interest rates.
“Those pressures have been compounded by the softening in the labour market.
“Even when households are spending, they are forgoing ‘nice to haves’ in favour of value for money.”
He expected spending to “remain soggy for some time yet”.
The latest ANZ Merchant and Card Spending data showed spending on durables, discretionary spending categories, clothing and housing-related categories was particularly weak.
Annual growth was 0.9% year on year in June, but had fallen below 1%, suggesting sales volumes were still falling. Annual growth was recorded at 2.3% the previous month.
Spending on miscellaneous services, miscellaneous goods and utilities/repairs were the only categories where annual growth remained positive, the data showed.
Discretionary spending continued to sink in June, down 3.6% year on year.
This was underpinned by lower spending at restaurants and bars – the largest category in the discretionary spending group – with turnover running at -6.3% for the year to June.
Housing-related spending was down 3.2% year on year, with almost every category down on a year earlier.
“Sharply weaker construction activity is clearly having a big impact on this category,” ANZ chief economist Sharon Zollner said.
Tourism-related spending suffered a particularly sharp fall (down 1.9%) in the year to June (seasonally adjusted) compared with a year earlier, the report said.
Spending at vehicle rental companies continues to drop away, along with falls in spending for accommodation; airlines, tour and travel agencies; and novelty and souvenir shops.
Tourist activity was the only category with positive annual growth in June, up 29.1%.
“The lift in spending at tourist activities is holding up, possibly reflecting more Kiwis choosing to take holidays within New Zealand rather than offshore,” Zollner said.
The clothing retail sector continued to do it tough, with turnover down around 4% year on year in nominal terms.
Earlier this week, the Reserve Bank kept the OCR on hold at 5.5%, but it was the bank’s dovish tone that has given markets more confidence in rate cuts coming this year.
The Monetary Policy Committee noted that interest rate pain may be feeding through to the domestic economy “more strongly than expected”.
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.
