Retail spending reinforces expectations for economic downturn, says Westpac

Stats NZ's electronic spending data released today is in line with an economic downturn expected by economists, says Westpac. Photo / Alex Burton

Total retail spending rebounded in June but core spending remains flat, reflecting ongoing pressure on households’ finances, according to Westpac senior economist Darren Gibbs.

New Stats NZ data showed spending in retail industries increased 1 per cent between May and June ($68 million), while spending in core retail industries was unchanged.

Last month’s card spending data showed a 1.7 per cent drop, with spending down across all categories.

Gibbs said the rebound in total retail spending was expected but the composition of the rebound was “somewhat disappointing”.

“Increased spending on fuel was the key contributor to the lift, likely reflecting slightly higher average fuel prices during the month and some stockpiling ahead of the July 1 lift in the fuel tax rate.”

Spending on fuel had the biggest jump in June, up 3.8 per cent ($20m) on May, followed by spending on motor vehicles, which was up 2.4 per cent ($5.1m).

Unlike trends seen in the first half of the year, spending on consumables recorded a small increase, up just 0.2 per cent ($5m).

Apparel shoppers spent 2 per cent ($6.6m) more, with durables spending up 0.5 per cent ($8.2m).

Non-retail spending (including healthcare and travel) in June was up 2.8 per cent ($60m) on May, with the services category (including repair and maintenance) up 1.4 per cent ($5m).

The total value of electronic card spending, including non-retail categories, was up 1.3 per cent or $119m on May overall.

In actual terms, cardholders made 161 million transactions across all industries in June 2023, with an average value of $55 per transaction.

The total amount spent using electronic cards was $8.9 billion.

Core spending was flat in June after a 1.4 per cent decline in May, with another month of softer hospitality spending.

Gibbs said this could stem from Kiwis spending less, due to hikes in mortgage rates.

“This perhaps reflects a clampdown on discretionary spending as mortgage rate refixing leads to growing pressure on households’ finances.”

He said next week’s consumer price index is likely to confirm that retail prices are continuing to rise at a rapid pace, while increasing numbers of households are rolling on to higher mortgage rates.

“We expect those factors will be an increasing drag on household spending over the months ahead.

“Today’s result reinforces our expectations for a downturn in domestic economic conditions over the coming months.”

Eftpos provider Worldine’s spending data (excluding hospitality) for June was up 5.3 per cent on last June, reaching $2.91 billion.

Chief sales officer Bruce Proffit said the data showed that spending has not changed much in the last few weeks compared to the previous month, although there were pockets of higher spending in Whanganui and Otago.

He said spending on non-food items was lower than last year, while food spending has increased nationwide.

Worldline data showed spending through food and liquor stores in June was up 9.4 per cent on last year, with fuel retailing jumping 24 per cent in the week ending Friday, June 30 from the previous three-week average, with the largest spike on Friday.

The highest annual retail spending growth around the regions was recorded in Whanganui, up 11.2 per cent on last year, while the lowest growth rate was in Wellington, up 3.4 per cent on last year.

June quarter spending

In the June quarter, spending in retail industries was up $124m (0.7 per cent) with spending in core retail up $131m(0.8 per cent).

Consumables, durables and motor vehicle spending were up 2 per cent ($152m), 1.1 per cent ($58m) and 0.8 per cent ($5.1m) respectively on the previous quarter.

Apparel and fuel spending were down 3.4 per cent ($35m) and 7.2 per cent ($121m) from the March quarter.

Alka Prasad is an Auckland-based business reporter covering small business and retail.