Strong Kiwi household spending heats up in August, and new stats show huge change from Delta doldrums

Shoppers splashing the plastic cards helped New Zealand hit a new record - but inflation is complicating affairs. Photo / Alex Burton

Retail card spending shot up massively in August but high inflation could still spoil the party for New Zealand's economy.

Kiwis with cards spent $55 million (0.9 per cent) more in August 2022 than in July, Stats NZ said today.

It was the biggest card spending increase in history when adjusted for seasonal effects, which essentially meant adjusting for the typical seasonal surge in Christmas spending.

The overall consumer spending leap came despite Kiwis forking out $17m less on fuel last month than in July.

Stats NZ said lower fuel prices last month were the reason for that blip.

The new Stats NZ data also showed a huge 32.5 per cent leap in year-on-year retail card spending.

In August last year, the Delta lockdown was activated.

Spending during Delta on restaurants, hotels, and non-essential items was massively reduced, Stats NZ business performance manager Ricky Ho said.

Spending last month on durables such as furniture, hardware, and appliances increased 51.2 per cent ($508m) on August 2021.

And spending at restaurants and hotels increased by more than half a billion dollars, up 78.2 per cent or $505m from August last year.

The new data arrived during a complex time when some people were wondering if recession was imminent. June quarter GDP results are due next Thursday.

The new data covered credit and debit card transactions in shops and online, across retail and services industries.

ANZ chief economist Sharon Zollner said it was important in a high inflation environment for everybody to get smarter about real and nominal figures.

If inflation was still at 7.3 per cent, then a nominal spending increase lower than that amount didn't really translate into boom times.

But Zollner added: "It's absolutely true that spending is holding up better than consumer sentiment is."

Apart from some inflation-related increases, and the dip in fuel spending excluded, two factors could be influencing the increased spending.

"Job security is very good and wages are growing very quickly," Zollner said.

She was not expecting a fall in GDP for the June quarter.

Zollner said ongoing supply chain issues linked to the global pandemic meant weak GDP figures did not mean an automatic translation to weak consumer demand.

Annual inflation has been reaching levels not seen in more than a generation - 6.9 per cent in the March quarter and 7.3 per cent in the June quarter.

To combat inflation's more nefarious effects, the Reserve Bank deploys increases to the official cash rate (OCR).

A higher OCR can encourage saving and discourage borrowing.

The data Stats NZ released today covered credit and debit cards used in shops and online, across retail and services industries.

NZIER principal economist Christina Leung said inflation was a big caveat but positive signs could be extracted from today's data.

"It suggests that households are able to spend even in the face of these price increases."

Spending on durables was down $8.7m from July but spending on consumables was up by $17.9m.

Leung said the data on durables was not surprising because spending sprees in this area were often linked to a hot housing market rather than the current anaemic one.

"Overall, it still points to a pretty resilient household sector despite the headwinds from rising living costs and higher interest rates."