‘Soggy’ spending data points to consumers’ unwillingness to spend

Card spending remained subdued in April. Photo / 123RF

Retail spending continued to fall in April as Kiwis shut their wallets amid a cost-of-living crunch.

Spending in retail industries fell 0.4 per cent, or $25 million, compared to March, Stats NZ said today.

Core retail spending (which excludes motor vehicles and fuel) declined 0.7 per cent or $40m.

ASB senior economist Mark Smith said card spending remained subdued as consumers keep their wallets shut given mounting headwinds.

“High interest rate settings are clearly working to crimp consumer spending,” he said.

“[Consumers] are essentially hunkering down. If they can, they are conserving cashflow where they can.”

Smith said the headline spending figures were a mixed bag with retail card and core spending values down, but total card spending rebounding from its March fall.

There were sizeable falls for the durables category, down 0.7 per cent or $11m, apparel (down 1.7 per cent or $5.7m) and hospitality (down 0.4 per cent, $5.6m).

Consumables fell 0.3 per cent ($9m), despite rising food prices.

Spending on fuel was down 1.1 per cent ($6.1m) and motor vehicles (excluding fuel) declined 0.5 per cent ($1m).

The total value of electronic card spending, however, increased from March 2024, up $85m (0.9 per cent).

“This month’s soggy performance was pretty broad-based amongst the retail components, with few bright spots among the individual spending categories,” Smith said.

“The level of core, retail, and total card spending is about 3 per cent below 2023 nominal highs, with the largest falls for durables, hospitality, apparel, and fuels.

“Card spending has retreated much further on a per-capita basis, with a much larger decline in card-spending volumes adjusting for high retail prices.”

Smith said the New Zealand economy had been in the unusual position of being in a consumption-driven downturn despite solid population growth.

But net migration inflows into New Zealand were now well past its peak, he said.

Figures from Stats NZ today show there were 239,000 migrant arrivals in the 12 months to March 2024, up 39 per cent compared with March 2023.

The 127,000 migrant departures left the country with a net migration gain of 111,100.

The long-term average for March years (pre-Covid 2002–2019) is a net migration gain of 27,500.

Smith said cuts to the official cash rate looked some way off, despite the retail recession.

“The message we’ve had for a while is there will be some more pain to come - consumers are certainly in the firing line,” Smith said.

“We expect the retail backdrop to remain subdued over the remainder of 2024 as the monetary policy brakes are applied and consumers show neither the willingness nor ability to spend.”

The Reserve Bank of New Zealand will make its next OCR call on May 22, when it publishes its quarterly Monetary Policy Statement.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.