Lower petrol prices offset spending in January

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Retail spending charged to electronic cards fell 0.4 per cent last month, its third monthly decline in a row, as lower prices at the pump offset increased spending elsewhere.

The cards data captures about 69 per cent of retail spending, missing spending paid by cash, cheques or hire purchase agreements.

In the core retail sector, which excludes petrol stations, spending was up 0.9 per cent on December in seasonally adjusted terms, the third highest monthly increase in the past year.

Unadjusted core retail sales were up 7.6 per cent on January last year, the fastest annual pace for three years, including an 8.3 per cent rise in spending on consumables like food, 10.7 per cent in the hospitality sector, 5.6 per cent on durables and 1.5 per cent on apparel.

But spending on vehicle fuels was down 13.4 per cent on a year ago, which limited the annual rise in total retail card spending to 4 per cent.

Deutsche Bank chief economist Darren Gibbs said continued improvement in the labour market, including slightly stronger wage growth, and wealth effects linked to rising house prices would ensure core consumer spending continued to grow at a reasonable clip this year, albeit slowing through the year as lower incomes in the dairy sector affected spending in the regions.

"The sharp decline in fuel prices should help support spending across the economy, however," he said.

ASB economist Nathan Penny said that even though lower fuel prices were dampening the reported dollar spend at present, they would help lift overall spending volumes in time.

"We expect a similar impact from lower interest rates," he said.

"The main exception to the rule is likely to come in rural areas where the low milk price will constrain incomes and spending."

See the latest card spending stats here: