Plastic cards staying in wallets

Consumers' plastic cards saw less of the light of day last month.

Retail spending paid for by debit, credit or charge cards fell 0.7 per cent from January, seasonally adjusted, Statistics New Zealand said.

Core sales, which exclude gas stations and car yards, fell 0.5 per cent.

Spending on durables was down 0.3 per cent, hospitality down 2.5 per cent, apparel down 2 per cent and vehicles down 1.2 per cent. Only consumables and fuels were higher, by 0.5 and 0.1 per cent cent respectively.

Compared with February last year actual sales were 8.2 per cent higher for the total retail sector and 8 per cent for the core, but the comparison is distorted by the leap year.

Statistics NZ's trend measure has been declining since November last year and for the total retail sector recorded no growth at all last month.

The Reserve Bank in the forecasts it released on Thursday expects household spending to grow modestly, as households reduce debt.

"Weak credit growth, which has been well below that implied by turnover in the housing market, gives weight to this assumption."

Mortgage debt in January was only 1.2 per cent higher than in January last year but house sales were up 25 per cent and the Real Estate Institute's housing price index was up 4.3 per cent over the same period.

"Households have built up a significant amount of debt over the past decade and are expected to undertake a period of consolidation," the bank said.

"This, along with weak house price inflation and slightly higher interest rates, is expected to see consumption growth remain modest."

The bank's forecasts have real private consumption growing at an average pace of 2.3 per cent over the next three years, similar to last year, and slower than the average 3 per cent growth projected for the economy as a whole.

Electronic card transactions data capture around 65 per cent of core retail sales, but in the September and December quarters grew much more slowly than Statistics NZ's more comprehensive quarterly retail trade survey.

Goldman Sachs economist Philip Borkin said the disparity was likely to have been more pronounced in that period because of a higher proportion of cash spending during the Rugby World Cup.

He is "relatively circumspect" about the outlook for household consumption.

"Despite the labour market being forecast to improve, disposable income growth should slow over the next 12 months as the impact of personal tax cuts rolls off and non-labour income growth slows," Borkin said.

"Against a backdrop of slowing population growth, stronger household consumption growth will require a drop in the household saving rate and we see that as unlikely in the current environment. In fact, we see it as more likely that the household saving rate continues to rise."