Covid-19: NZ went hard, early, and then went shopping

The lockdown saw a steady build up of pent-up consumerism. Photo / Getty Images

Retail spending on credit and debit cards bounced back in May as businesses reopened from the covid-19 lockdown, although spending at hotels, motels, cafes and restaurants was unsurprisingly below normal.

"Covid-19 saw New Zealand go hard, go early, and then go shopping," said Westpac Bank senior economist Satish Ranchhod.

Stats NZ figures showed seasonally adjusted retail spending on electronic cards rose 78.9 per cent in the month of May after falling 47.5 per cent in April. Economists had been expecting a lift of about 60 per cent, according to Westpac.

Stripping out fuel and vehicle spending, core retail spending was up 72.6 per cent.

The lift was driven by a 10-fold gain in spending on hospitality and a nearly six-fold increase in apparel retail. Spending on durable goods also jumped.

In seasonally adjusted dollar terms, hospitality spending hit $640 million in May versus $57 million in April. In February it was $1.1 billion. Spending on apparel last month was $246 million, versus $35 million in April. In February, it was $309 million.

Resilient consumers

Spending on durables, which includes furniture, electrical, and hardware goods, was $1.5 billion versus $387 million in April. The May number was well above average.

"Some of this rise was due to pent up demand after the lockdown and spending remains below pre-covid levels. However, this does signal an encouraging degree of resilience in household spending appetite," Ranchhod said.

While he expects further gains in the coming months, he doesn't expect a return to pre-covid-19 levels for some time.

"That's due to factors including job losses, increases in debt, and general nervousness about the economic outlook which will dampen spending appetites," he said.

Continuing border restrictions will also be a major drag on spending in areas like hospitality.

ASB Bank senior economist Mark Smith also expects pent up demand to produce a few solid months for the retail sector.

He warns, however, the large economic toll imposed by covid-19 means that any retail rebound will be short-lived, particularly for discretionary spending, as consumers adjust to the new normal.

Meanwhile, consumer electronics retailer JB Hi-Fi New Zealand said it has now resumed full trading and the initial sales performance had been solid as the country came out of lockdown.

However, it lowered its sales expectations for the financial year ending May 31.

In early February, it said it expected current-year sales of $240 million. It now expects $220 million.

Also, "given the ongoing challenging performance and expected continuing uncertainty in New Zealand, the group is in the process of reviewing the carrying value of certain JB Hi-Fi New Zealand assets," the ASX-listed retailer said.

This is expected to result in a non-cash impairment in JB HI-FI New Zealand of approximately A$25 million post tax in the current financial year.

- BusinessDesk