Electronic card spending still going strong - Stats NZ

Total electronic card spending climbed $88 million, or 1 per cent, in October from the previous month. Photo / NZME

Retail card spending is still going strong, especially on non-essential items, suggesting higher interest rates are yet to bite.

Total electronic card spending climbed $88 million, or 1 per cent, in October from the previous month, according to Stats NZ’s latest figures.

October saw a $46m rise in spending on durable goods, including furniture, hardware, and appliances. This is an overall increase of 2.8 per cent since September, which saw a $10 million drop in durables spending.

Stats NZ business performance manager Ricky Ho said it was the first month where spending had increased across all categories since May.

“The higher spending on durables this month could have been influenced by people buying items in preparation for summer,” Ho said. “Card spending could also have been impacted by the increase in prices over the last several months.”

Spending on consumables such as groceries, supermarkets, and liquor rose by $23 million, while spending on motor vehicles (excluding fuel) grew by $12 million. In turn, fuel spending went up by $5.5 million.

Spending on apparel continued to grow, increasing $1.3 million from September.

In actual terms, total card spending in October was $9.1 billion, rising 20.2 per cent in the last 12 months.

Ho said card spending in October 2021 was largely affected by Covid-19 which wasn’t an issue for Kiwis this October.

Spending on hospitality was up $398 million (45.9 per cent) since October last year, showing the highest increase in spending.

Westpac senior economist Satish Ranchhod said households have continued spending in the face of rising interest rates.

High levels of fixed mortgage rates, relatively low debt, and increased salaries had led to increased spending but that could change soon.

“More and more households are going to roll off these fixed mortgage rates. That sets us up for quite a slowdown in spending over the year ahead.”

Economist Satish Ranchhod, senior economist at Westpac Bank. Photo / Greg Bowker

Some of the resilience of spending will have been supported by the Government’s cost of living payments, he added.

“We’ve also seen consumer prices charging higher, meaning that a good chunk of the spending increases we’ve seen in recent months are actually just price rises (rather than households choosing to consume more).

“But with spending on discretionary items holding firm, it’s clear that household spending appetites haven’t been significantly dampened by the rise in borrowing costs to date.

“In large part, that’s because many New Zealand borrowers are on fixed mortgage rates and are yet to feel the full force of the rise in borrowing costs.”

Non-retail spending, excluding services, grew by $2.1 million (0.1 per cent) from September 2022. This includes medical and other health care, travel and tour arrangement, postal and courier delivery.

Spending on services including repair and maintenance, and personal care, funeral, and other personal services was up $11 million (3.3 per cent).

Ranchhod said demand for retail products is a bigger driver of the significant rise in durables spending, rather than inflation. He says for the Reserve Bank, Stats NZ’s figures show “a lot of strength in the economy,” meaning the need to increase interest rates further to slow down inflation.