Spending weak over March as Kiwis watch their wallets

Spending remains weak as Kiwis grapple with tight budgets. Photo / Sylvie Whinray

The Easter bunny didn’t bring much good news for retailers in March, with spending remaining weak as Kiwis grapple with tight budgets, according to Worldline.

Consumer spending through core retail merchants (excluding hospitality) in Worldline NZ’s payments network reached $3.05 billion in March, down -0.2 per cent compared with March 2023.

Spending over the five Easter trading days (Thursday to Easter Monday) was up 2.5 per cent compared with the same period last year.

But that only pointed to softness in the economy, said Westpac senior economist Satish Ranchhod.

Ranchhod said over the past year the population had grown by 2.8 per cent and prices had increased at least 4 per cent.

“Putting those factors together, an increasing in spending of only 2.5 per cent actually points to some pretty soft spending appetites out there,” he said.

“The areas where we’re seeing a lot of softness are those discretionary areas, things like apparel, durables for the home. Households are really winding back their spending on those fronts.

“Retailers around the country are telling us that things are getting tough.”

Ranchhod said inflation was still the big sticking point.

“Even though it’s dropped back, it’s still pretty high, and at the same time we’re now seeing the labour market softening.

“We have been seeing spending appetites and economic activity generally crawling through the early part of this year.

“I think we’re going to see households being cautious about their spending over the coming year.”

Worldline NZ’s chief sales officer Bruce Proffit noted that most of the trading-constrained Easter long weekend fell in March this year when it was entirely in April in 2023.

“Spending was up 0.4 per cent on 2023 during the first three weeks of March. It is this figure that is indicative of the underlying consumer spending pattern,” Proffit said.

“This annual growth rate is low and lower than the already slow growth experienced in February, meaning times are still tough for merchants and their customers.”

Proffit said spending on Easter Thursday jumped 6.4 per cent compared with the same day last year.

“This also made it the fifth highest spending day of the last 12 months, only behind the few shopping days before Christmas Day,” he said.

“As usual, consumers spent more on groceries on this day and – to a lesser extent – stocked up on books, plants, hardware, sports equipment and clothes.”

Supermarkets around the country are required to be closed on Good Friday and Easter Sunday under law.

News of the country going into recession in the December 2023 quarter did little to improve the sentiment of businesses and consumers.

Business confidence fell 12 points to +23 in March, according to the ANZ Business Outlook last week.

Meanwhile, ANZ-Roy Morgan consumer confidence fell nine points in March to 86.4.

Westpac’s Ranchhod said they expected the Reserve Bank to keep the official cash rate (OCR) on hold at 5.5 per cent when it meets next week to decide its next course of action.

“While we’re seeing activity cooling and importantly those inflation pressures are still simmering away, I think the Reserve Bank is going to want to keep their foot on the brake for some time yet,” Ranchhod said.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports.