Clothing retailers bear brunt of spending slump, tourism a bright spot

Tourism-related spending held up in March. Photo / Matteo Colombo

Clothing retailers are particularly being hit hard as Kiwis rein in their discretionary spending, according to ANZ.

The bank’s merchant and card spending data for March showed annual growth in total spending was 2.5 per cent, lower than last month’s annual figure of 3.5 per cent.

Monthly spending was flat, growing 0.3 per cent in March – the same as in February.

However, spending on clothing was down by 1.7 per cent in the year to March.

“Clothing shops have done it tougher than almost any other type of retail in the past year. Turnover was looking brighter in February, but things unfortunately took a leg lower again in March,” ANZ chief economist Sharon Zollner said.

Durables’ spending fell by 0.8 per cent year-on-year.

Zollner said durables’ spending remains under pressure due to higher interest rates.

“Durables and discretionary spending like clothing continue to be particularly exposed to more caution on the part of consumers,” she said.

Other notable discretionary spending areas to decline were restaurants and bars (-3 per cent); hobby, toy and game stores (-3 per cent); book stores (-4.6 per cent); and music and instrument stores (-8.4 per cent).

“Spending across a range of categories that can be considered discretionary is lower, compared to a year ago, even though prices will have gone up a lot over that period. That suggests turnover is well down,” Zollner said.

On the flip side, tourism-related spending remains a bright spot, up more than 6 per cent year-on-year.

But the lift in spending at tourist activities (up 39.6 per cent) was particularly notable, Zollner said.

Annual growth in accommodation spending was up 4.7 per cent and airlines, tour and travel agencies rose 4.2 per cent.

However, annual growth in car rentals slipped back into the red, down 1.3 per cent.

“The summer tourism peak is over, but both actual and seasonally adjusted spending held up in March,” Zollner said.

“Cashflow in real life isn’t seasonally adjusted, and retail and hospitality in tourist hot-spots will feel the drop in footfall as autumn progresses, given the cautious spending of the locals.”

Elsewhere, housing-related spending remained in the black, despite the housing group containing a long tail that is well down year-on-year, Zollner said.

That was helped by growth for home furnishing and supply stores - a big chunk of the category - running at about 8 per cent.

Annual growth for swimming pools was down 5.9 per cent.

On Friday, Stats NZ will release electronic card spending data for the month of March.

In February, retail spending dropped 1.8 per cent, or $120 million, compared with January.

ASB senior economist Mark Smith said at the time that February card spending “tanked despite climbing prices and strongly growing population”.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports.