Football World Cup fails to fire spending as retail sales fall flat

US fans watching their team take on Vietnam during a Fifa Women's World Cup game at Eden Park. Photo / Michael Craig

The total value of electronic card spending decreased from June 2023, down $85 million (0.9 per cent), Stats NZ said today.

“The result was also disappointing given the boost to demand from spending related to the Fifa World Cup events over the past month. With international visitor numbers trending higher, that points to softness in domestic spending appetites,” said Westpac senior economist Satish Ranchhod.

In actual terms, card-holders made 161 million transactions across all industries in July 2023, with an average value of $55 per transaction. The total amount spent using electronic cards was $8.8 billion.

By spending category, the movements were: consumables, up $22m (0.9 per cent), apparel, up $0.7m (0.2 per cent), durables, down $8.7m (0.5 per cent).

Motor vehicles (excluding fuel) were down $11m (5.1 per cent) and fuel was down $30m (5.5 per cent).

New vehicle registrations plunged to 6202 last month - or just under half a typical month last year - as a range of government subsidies for electric vehicles were adjusted.

Digging under the surface, the result pointed to underlying softness in spending appetites, Ranchhod said.

“Looking at spending over the July month, the only area to record an increase was the groceries category. Food prices have been rising rapidly in recent months, and much of the increase in spending is because households are having to spend more on their weekly shop (rather than taking more items home),” he said.

Taking a longer-term perspective, retail spending levels were up 4 per cent over the past year.

However, the past year had also seen a sharp rise in population growth, while consumer prices had risen 6 per cent.

“Those conditions mean that even though households are splashing out more cash, the amount of goods they’ve been receiving has been going backwards,” Ranchhod said.

The high cost of living meant households were spending a greater proportion of their budgets on essentials, with little left over for discretionary spending, said ASB economist Kim Mundy.

“Services spending, for example, which includes repairs and maintenance and personal care, fell 3 per cent over the month,” she said.

“Moreover, still-high inflation suggests that the pullback in consumer spending currently underway is more pronounced than the headline values suggest.”

There were still some supports: strong population growth thanks to high levels of net migration was a tailwind for consumption and the housing market and would help to prop up aggregate spending, even if per-capita levels continued to decline.

“Nevertheless, slowing consumer spending is consistent with our view that the current 5.5 per cent OCR is likely to be the peak. But, with inflation still well above the RBNZ’s 1-3 per cent inflation target, talk of OCR cuts is premature.”

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.