Glimmer of hope on the cards for retailers

Shoppers used their plastic cards more freely in May than they have for months, in what could be an early sign of recovery in the hard-pressed retail sector.

Statistics New Zealand's electronic card transactions data recorded a 0.9 per cent increase, seasonally adjusted, in the value of retail transactions charged to credit, debit and charge cards last month.

It was the biggest monthly increase since last October, though the value was still only 0.7 per cent up on May last year.

Excluding the automotive sector, sales were 1.6 per cent higher for the month, the biggest since last July, and 4.2 per cent up on a year ago.

Deutsche Bank chief economist Darren Gibbs said the figures indicated consumer spending was starting to recover, thanks to the combined impact of monetary policy easing, aggressive fiscal stimulus and rising net immigration.

"The improvement is no surprise given the increased activity already seen in the housing market and the fact that consumer confidence has returned to levels last seen in September last year," Gibbs said.

Considerable relief for borrowers still remains in the pipeline as people continue to refinance on lower mortgage rates, and he expects retail spending to pick up "a little further" over the rest of the year.

But in light of concerns about job security and the need for households to rebuild their balance sheets, Gibbs said he would be surprised to see retail spending rebound strongly.