Consumer spending growth stalls in 2024, December spending down

Consumer spending fell by 0.8% in 2024, representing the lowest growth in spending since 2020. Photo / Alex Burton

New Zealand’s consumer spending growth was at its lowest level in five years in 2024, as Kiwis spent less in December despite a late holiday rush, payment provider Worldline has revealed.

Spending through core retail merchants (excluding hospitality) reached $36.03 billion in the full year of 2024, which is up by 0.8% on 2023 after adjusting for merchants moving to or from the Worldline payments network.

However, while the number of transactions increased, the average transaction size declined by 0.6% (adjusted) to $50.35.

Worldline NZ’s chief sales officer Bruce Proffit said it was the lowest growth he had seen in the last five years.

“While consumers may have made more transactions through retailers in Worldline NZ’s payments network than the previous year, the annual underlying spending growth — that is, the actual increase in dollars spent — was the lowest we’ve seen in the last five years,” Proffit said.

“If we look back at 2020, that was clearly a tough year both for consumers and retailers with the onset of Covid, which led to a drop in the number of transactions made through Worldline NZ’s network that year.”

Proffit said that the key driver for the decrease was likely the ongoing adjustment of household budgets during the continued cost-of-living crisis.

Hospitality merchants particularly faced declining spending, reaching only $11.39 billion for 2024, down by 2.7% compared to 2023.

The average transaction value for hospitality also fell across 2024, down by 1.2% compared to 2023 at $29.51.

Steve Armitage, chief executive of Hospitality NZ, said the drop in spending was consistent with what members were experiencing. Photo / Michael Craig

Hospitality NZ’s chief executive Steve Armitage said the drop in spending was consistent with what they heard from members over the year, particularly during the winter months.

“As we know, households experienced reduced disposable income, so even when they were able to enjoy visiting a hospo establishment, it’s not surprising that average transaction value was also reduced,” Armitage said.

“While that has had some impact on the number of venues, we also note there are plenty of new ventures opening, indicating an optimism and continued passion for hospitality. At Hospitality NZ, we are cautiously optimistic that 2025 will hold better fortunes for the industry.”

Marisa Bidois, chief executive of the Restaurant Association. Photo / Supplied

Likewise, Restaurant Association chief executive Marisa Bidois said that although the Christmas preiod is traditionally a high point for the industry, households are continuing to grapple with uncertain economic conditions.

“Many of our members have reported quieter-than-usual trading during December, which aligns with the data,” Bidois said.

“While these figures are concerning, they are not surprising given the current climate. Rising interest rates, inflationary pressures, and changes in consumer spending habits have had a cumulative impact on the industry.

“At the same time, the industry faces rising costs of doing business, including higher wages and high ingredient costs which further compound these pressures.”

She echoed the sentiment throughout the industry that 2025 will hopefully be a better year thanks to increased consumer confidence, with Bidois encouraging Kiwis to get out and support local hospitality.

December hampered early

Consumer spending declined in December despite a late boost from holiday sales.

When processed through all non-food core retail merchants in December, consumer spending reached $3.82b, down 0.7% compared to December 2023.

Regionally, large declines occurred in the major centres of Auckland/Northland (-2.0%), Wellington (-2.0%) and Canterbury (-0.4%).

The largest decline nationwide was reported in Marlborough, down by 2.2% compared to 2023.

Annual spending growth was highest on the West Coast (+4.2%) and at Whanganui (+3.4%).

Retail NZ chief executive Carolyn Young agreed that sales targets for the year were likely cause for concern.

“Retailers have advised us that the Christmas rush was late arriving and that although Boxing Day sales were busy, they might not make up for the slow start to December,” Young said.

“Profitability will continue to be a major challenge for retailers as they finish off what has been a difficult 2024.”

Young said the economy needs to turn around before any recovery can happen, and although a number of levers have been pulled by the Government and the Reserve Bank, she expects the first six months of 2025 to remain challenging.

“There are two main factors that are going to affect consumer confidence. Firstly job security. There’s been a lot of people who have been impacted by restructures in their business or with a friend or a member of their whānau now. If you’re not confident in your job, you’re not going to be thinking about going out for dinner or going and buying a little something for yourself in the shops.

“Secondly, seeing the positive impact of the change of those interest rates into your wallet. If we can get those two factors aligned, we’re going to see an improvement in consumer confidence.”

She had spoken to a number of retailers who had told her it was their “worst year ever” in terms of financial impact and the personal toll.

“It’s been super difficult and businesses are hanging on by their fingernails, so we’re really hopeful that we can get through the next few months and start to see some changes.”

Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.