For any business relying on consumer spending, 2020 was a wild ride. But as the year wore on, even the most extreme gyrations began to seem more predictable.
When the country went into the strictest lockdown - level 4 - on March 25 last year, spending plummeted for the first few weeks. But then it rebounded, as fear and panic buying set in and shoppers put hundreds of millions of dollars through supermarket checkouts.
While overall spending tumbled, more cash was spent on consumables: food and drink, baking supplies and toilet rolls - lots and lots of toilet rolls.
As spending on groceries surged, so did messages from the Government and the private sector, urging consumers to "shop normally" rather than buying six of the same item, and spreading the message that stock wasn't about to dry up and be rationed.
Come April, when trading and movement restrictions were loosened slightly under alert level 3, which allowed the sale of takeaways, retail spending spiked again. Queues snaked around fast food drive-through lanes and there were reports of outlets such as KFC running out of chicken at some branches.
Level 3 provided a welcome spending boost for concerned operators, allowing non-essential retailers and other businesses to resume trade through e-commerce.
The ups and downs of last year's spending trends can be charted in figures from Paymark, which processes 75-80 per cent of the country's electronic card transactions from in-store purchases. Those figures reveal a series of peaks and troughs through 2020, reflecting changes in trading and movement restrictions.
Auckland has faced three level 3 lockdowns, as well as the nationwide 50-day lockdown in the first half of 2020.
Paymark data guru Ella Obreja describes 2020's spending patterns as "unprecedented".
"I don't think anyone was expecting this," she says. "When the big lockdown hit us, I think everybody panicked and thought 'OMG this is going to be a long recession and a long road to recovery'. But thinking back, New Zealand has done very well and [the response] shows looking after people means you look after the economy."
Obreja, who heads Paymark's data and customer experience team and spent a lot of last year in daily meetings with government officials, says New Zealand's recovery has been either V-shaped or K-shaped, depending on your point of view. A V-shaped recovery has a sharp fall followed by an equally rapid rebound. The K-shaped version, however, is the term often used for a situation where parts of the economy bounce back, while others lag.
Despite all the wild swings, New Zealand ended the year almost on par with 2019, with overall spending through the Paymark network up 0.1 per cent on the previous year at $42.6 billion.
Before the pandemic, spending through Paymark had been growing by about 5 per cent year-on-year, so that 0.1 per cent was a relative slowdown, but spending did not go backwards.
The first six or seven weeks of lockdown were eerily quiet for spending through the network, says Romanian-born Obreja. But compared to how other countries have fared, New Zealand managed the health crisis remarkably, she says.
Typically, the slowest day of trading is January 1. Last year, the first six or seven weeks of lockdown were almost a continual groundhog day, repeating January 1 over and over again, with "way lower" transaction volumes than typical for the days in question.
Obreja says she had not expected the drop in spending to be so significant. "Overall on the network, we dropped about 70 per cent in terms of spend because only supermarkets, pharmacies and petrol stations were open and you could only buy essentials."
The first lockdown was announced on a Monday, March 23, and that set off the first wave of panic buying and the first peak in spending, fuelled by bulk purchases as people stocked up and emptied supermarket shelves of suddenly-essential products such as toilet paper, pasta and flour.
Over that period the value of the average transaction doubled, up from about $40 in more normal times.
In April, there was a sharp drop in total spending through Paymark across all core retail categories - with the exception of supermarkets.
But from June, spending at merchants, with the exception of accommodation providers, tracked around 7 per cent above 2019 levels for the rest of the year. Meanwhile, spending on accommodation remained well below 2019 levels.
ASB senior economist Mark Smith says 2020 can be broken into three distinctive spending stages: the crisis stage; the relief rally; and the consolidation period.
He says there were early signs of a coming negative impact on retail spending even ahead of the country moving into the first lockdown.
But "when Covid hit is when you saw a real change in patterns; a lot of emergency stockpiling by households. Supermarkets and even liquor sales did very well with this stockpiling taking place. Combined with that, we had the lockdowns come into effect right through to late May and that resulted in a lot of retailers being closed; things like durables, apparel and hospitality, in particular, were very hard hit from the initial stages."
At the start of 2020 the initial plunge in spending was felt across the durables, clothing and hospitality categories, as well as fuel sales. In April, the level of spending halved, says Smith.
"From May we had the signs of easing of restrictions for Covid - New Zealand did very well, it went hard, it went early and managed to contain community cases, and that saw a lot more retail come online. What we saw was essentially a bounce back in those sectors that had been forced to close - strong gains surged in apparel and durables in particular.
"There was also the realisation, with households spending more time at home, that people needed to do up the house a bit better to future-proof it in case there was another outbreak. Spending more time at home saw a flurry of people upgrade appliances, and that really underpinned a surge in spending on durables from May through to September.
"People were stocking up a lot on consumable goods, and they actually didn't do a lot of consumable goods shopping over the relief rally period," says Smith. "Instead, they went out and started to buy more durables and spend a bit more on hospitality. Apparel sales were also very strong, and fuel picked up a bit during that time.
"We've had the relief rally and then we've had the consolidation period going through to the end of the year. Spending was bobbing around - upwards and downwards movements - no real clear definitive trend. Still very strong demand for consumer durables - households were still keen to spend more on kitting out the home, also the housing market had picked up by then, which was providing a lot more support, and people continued their spending on furniture and appliances."
The first four months of 2021 have been a continuation of that "consolidation period", says Smith. "Durable spending has still done pretty well, things like hospitality are recovering.
"We had a huge dip at the start of last year, we've recovered, had a bit of a bounce and have been slowly trending up over the last few months."
Stats NZ core spending data for 2020 was up 5 per cent, while retail spending was up 4.5 per cent. Smith says the growth through last year, despite the circumstances, was surprising given that economists had widely expected spending to dry up.
"It has been the resilience of consumers that has kept the economy afloat last year, and this year as well - we're reasonably positive on that."
From here on, Smith expects to see "a rotation of spending", with consumers spending less on durable goods and more on services.
While it's still early days, the transtasman bubble and the Cook Islands bubble are likely to entice Kiwis away from spending on nest building, he says, and towards splashing out on accommodation, tourism and bookings with travel agencies.
Despite domestic spending remaining solid last year, New Zealanders still have money in the bank. Many households had built up savings during the lockdown periods and household deposits are now $20 billion higher than they were pre-pandemic, says Smith.
He predicts another spending splurge this year, but believes it will be in areas such as travel and tourism that missed out in 2020.
"The labour market is looking reasonably good, household balance sheets are looking good and consumers are getting more confident so that's a positive going forward."
The rebound
Paymark has been just as surprised by the steep rebound in spending post-lockdowns as it was by the initial steep drop.
Obreja says Christmas 2020 delivered the biggest surprise of all. "Christmas is normally a busy period but last year in particular - a combination of Black Friday, Cyber Monday and Christmas - over that entire period, spending was very strong.
"Christmas helped tremendously with the rebound, that's why when you look at the whole year, although we didn't have a lot of growth, we didn't go backwards."
There has not been a more volatile spending period than the year 2020 in the payments company's 32-year history, says Obreja.
What happens to spending during a health crisis is very different to the trends recorded during the global financial crisis (GFC) or other financial crises, she says. During the GFC, the average transaction size fell but transactions became more frequent, resulting in roughly the same amount of money being spent, albeit in smaller chunks.
Through Covid, however, the spending trends were the other way around: people were shopping less frequently but buying more each time, so the average transaction increased. People were also happy to splurge on luxury cars through that period, says Obreja - something that would not happen in a financial crisis.
Typically there are 156 transactions per second on the Paymark network, rising to more than 200 a second around Christmas. But in April last year, the network's quietest period, that fell to just 50-70 transactions per second.
"For us in New Zealand, 2020 started as a rollercoaster because we were thrust into lockdown which lasted quite a period of time, but then again purely looking at the Paymark data, it settled," says Obreja. "We went through some kind of more gentle peaks and troughs, particularly in Auckland - turbulence, that's the best way to describe it. And that's because we didn't have [multiple] all-out [nationwide] lockdowns like they had overseas."
The data recorded over the past year reflects human behaviour and the emotions prevailing at each stage, she says. "You can see the first lockdown with the panic buying, and the last lockdown it barely even registered because we had gained maturity with these lockdowns."
Anecdotally, business owners say lockdown got easier, with each tightening having less financial impact than the previous shutdowns.
Obreja says the data reflects this too, with marginal drops noted over those more recent times.
"There was a lot of expectation of a U-shaped recovery - that it would hit the bottom and we would stay there for six to eight months and then it would slowly come back up. But instead it stayed there for six weeks and was immediately straight back up."
Spending through Paymark at core retail merchants was about $10.5 billion in the March 2021 quarter, up 1.5 per cent on the same quarter in 2020, and up 5.9 per cent on 2019. National spending on accommodation in the quarter was $415 million, down 29.7 per cent on 2020 levels or 36.5 per cent on 2019.
Retail NZ's Greg Harford says that, all in all, spending through 2020 and into 2021 has been positive and the retail sector is "well ahead" of where the industry thought it would have been 14 months after the first major lockdown.
"Many people were predicting - including me - very significant economic problems resulting from the lockdowns we had, but things really have bounced back much more than we would have expected," Harford tells the Herald.
"New Zealanders weren't able to travel overseas so there was a lot of spending which was reprioritised from overseas holidays into doing up the house, tidying up the garden and buying books, games and electronic goods for the kids.
"There was a lot of spending that went into setting up home offices, buying desks, computers and monitors, and generally because people kept their jobs they were feeling relatively positive coming out the depths of the April-May period."
But while overall spending figures may be positive, Harford says only two-thirds of the country's retailers are reaping the benefits. The ones missing out, he says, are the smaller operators.
During the GFC, retail sales declined and consumers were far more cautious than they were coming out of Covid. Harford says that could be attributed to the much higher number of job losses after the GFC, and the fact that there has been strong fiscal stimulus from the Government to counter Covid's impact, which has helped consumer confidence.
Reflecting, he says 2020's spending patterns in many instances almost defied logic: "[2020] was, really, a weird year."
Where retail spending is today
In April, seasonally adjusted electronic card spending rose by 4 per cent, and proved much stronger than many economists had predicted.
The school holiday and reopening of the transtasman bubble have been credited with providing a strong lift to hospitality, apparel, and fuel retail in the fourth month of the year.
Excluding fuel and vehicle components sales, core spending rose 4.1 per cent.
After a few patchy months, ASB says spending in most groups rose in April, with fuel sales up 5.1 per cent month-on-month, apparel sales up 8.3 per cent, hospitality up 14.3 per cent, spending on durables up 1.3 per cent month-on-month and consumables up 1 per cent.
"After spending much of the March quarter on the sidelines, we expect increased consumer demand to help prop up the New Zealand economy over the remainder of 2021," the bank says in an economic report released on Tuesday.
A look back at 2020:
• February 28 First case of Covid-19 in New Zealand confirmed
• March 19 Border closes
• March 25 New Zealand goes into nationwide lockdown
• March 29 NZ reports first death from Covid-19
• April 27 Level 4 lockdown reduced to level 3
• May 13 Level 3 lockdown reduced to level 2
• June 8 Lockdown lifted; New Zealand moves to level 1
• August 12 Auckland placed into level 3 lockdown, rest of country level 2
• August 30 Auckland moves to alert level 2/2.5
• September 21 NZ moves to alert level 1
• February 14, 2021 Auckland put into level 3 lockdown
• February 18 Auckland moves to level 2
• February 28 10 days later, Auckland placed in level 3 lockdown
• March 7 Auckland moves to level 2
• March 12 Auckland moves to level 1
