Spending on fuel was down 2.8 per cent, although this likely reflected lower nominal petrol prices in May.
This was the fourth straight month of declines, and pointed to further belt-tightening by consumers after a year of already flat spending over 2023, said Westpac senior economist Michael Gordon.
“Spending on groceries is still holding up (+0.1 per cent in May), although retailers tell us that households are switching to lower-cost options. However, it’s a much softer picture in the discretionary categories. Spending on durable goods fell 1 per cent in May, and is down 8 per cent on a year earlier. There was also further weakness in hospitality and clothing,” he said.
In actual terms, cardholders made 164 million transactions across all industries in May 2024, with an average value of $55 per transaction. The total amount spent using electronic cards was $9 billion, Stats NZ said.
Spending in the retail industries decreased 1.1 per cent ($69m) and spending in the core retail industries decreased 0.8 per cent ($48m).
By retail spending category, movements were:
- Hospitality, down $25 million (2.0 per cent);
- Fuel, down $16 million (2.8 per cent);
- Durables, down $15 million (1.0 per cent);
- Motor vehicles (excluding fuel), down $9.5 million (4.8 per cent);
- Apparel, down $3.9 million (1.2 per cent);
- Consumables, up $1.3 million (0.1 per cent).
Spending was down across the board and the non-retail (excluding services) category decreased by $16m (0.7 per cent) from April 2024. This category includes medical and other healthcare, travel and tour arrangements, postal and courier delivery, and other non-retail industries.
ASB economist Kim Mundy noted that high interest rates were crimping consumer spending.
“That’s monetary policy at work as the RBNZ seeks to deliver sub 3 per cent inflation,” she said.
“We expect the retail backdrop to remain subdued over the remainder of 2024 as the monetary policy bites and consumers show neither the willingness nor ability to spend. The RBNZ is expected to remain laser-focused...being mindful that the final leg to delivering sub 3 per cent inflation could be the toughest.”
“We expect that the underlying trend in card spending to remain weak as the household sector hunkers down.”
“Retail spending levels have fallen over the last year despite some strong population growth, which points to an even sharper fall in per-capita spending,” Gordon said.
“In large part, that’s been a result of continued increases in living costs that are squeezing households’ spending power. Those pressures include increases in the costs of necessities like rent and utilities which are draining cash from households’ wallets, even though we’re now seeing more modest increases in retail prices.”
Gordon said he expected household spending to remain soft over the coming months.
“Households’ budgets remain under pressure from continued high interest rates and still-high inflation. At the same time, the labour market is softening. Those conditions mean that spending appetites are likely to remain weak for some time yet,” he said.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
