Kiwis closing their wallets: Retail spending tanks in February as tougher economy bites

The total value of electronic card spending in February 2024 decreased from January by $176 million, a drop of 1.9 per cent. Photo / 123RF

Retail spending by Kiwis dropped 1.8 per cent, or $120 million, in February compared with January, new figures from Stats NZ show.

Total February card spending “tanked despite climbing prices and strongly growing population,” said ASB senior economist Mark Smith.

“The figures reveal that the underlying retail position is extremely weak, with per household retail volumes contracting as living cost headwinds and the cooling labour market backdrop dampen household spending patterns and appetites.”

The biggest fall was in fuel consumption - down 3.7 per cent. But spending on apparel also fell significantly, down 1.5 per cent.

The non-retail (excluding services) category decreased by $55m (2.4 per cent) from January 2024. This category includes medical and other healthcare, travel and tour arrangements, postal and courier delivery, and other non-retail industries.

The services category was up $5.1m (1.5 per cent). This category includes repair and maintenance, personal care, funeral and other personal services.

The total value of electronic card spending, including the two non-retail categories (services and other non-retail), decreased from January 2024, down $176m (1.9 per cent).

“Retail spending has remained weak,” said Westpac senior economist Satish Ranchhod. “Taking a look at the longer-term trend, it’s clear that New Zealanders’ spending appetites are flagging. Spending has effectively been flat for a year. That’s despite the population growing by close to 2.8 per cent and continued increases in international visitor numbers.

“The softness in spending highlights the squeeze on households’ spending power from higher inflation and interest rates. We’re also likely seeing some households putting their cards back in their wallets due to nervousness about the economic outlook and the softening in the jobs market.”

In actual terms, cardholders made 160 million transactions across all industries in February 2024, with an average value of $55 per transaction.

On an annual basis, the total amount spent using electronic cards was $8.8 billion, up 4.9 per cent ($409m) from February 2023. February 2024 had an extra day of trading as it was a leap year.

Looking across spending categories, the biggest slowdown had been in interest rate-sensitive and discretionary areas, Ranchhod said.

“Spending on durable household items (like furnishings) was down 0.9 per cent in February and has fallen around 8 per cent over the past year. There’s been a similar drop in spending on apparel.”

Grocery spending had been more resilient.

“However, our discussions with retailers have highlighted the pressure on household finances. Many families have been switching to more budget-friendly options, and they’re foregoing ‘nice to haves’ in favour of necessities,” he said.

Hospitality spending had held up, but even on this front momentum looked muted. After rising rapidly when the borders were reopened, international tourist numbers are now growing at a more modest pace, Ranchhod said.

“At the same time, New Zealanders remain cautious about their spending on activities like dining out.

“Overall today’s data reinforces the picture of softening domestic demand,” he said. “We expect households to remain cautious with regard to their spending over the coming months. That’s likely to be compounded by the softening in the labour market already in train.”