Kiwis still out spending despite RBNZ's dampening efforts

Business / news

Stats NZ figures show that total card spending rose 1% after seasonal adjustment in April, following a big 3.1% rise in March

[updated]

9th May 23, 11:13am by David Hargreaves

Source: 123rf.com

The Reserve Bank's squeezing hard with the interest rates - but kiwis are still to this point going out and spending.

Statistics NZ’s figures for April show that total card spending in the month rose 1% on a seasonally adjusted basis. That followed a bumper 3.1% rise in March.

Spending in the retail industries was up 0.7%, which was the same increase as reported in March.

The RBNZ of course has been hiking interest rates in order to slow spending and take the heat out of the economy and inflation.

And while the rate hikes are clearly having an impact, Kiwi spending patterns are proving resilient at the moment.

Stats NZ said total seasonally adjusted card spending rose in April, up $91 million (1.0%), with spending on groceries and liquor driving this increase.

In actual terms, total retail card spending increased by $388 million (6.4%), and total card spending increased by $639 million (7.8%) from April 2022 to April 2023.

Clearly, of course, inflation would be, well, inflating, these figures as according to Stats NZ's Consumers Price Index (CPI) annual inflation was running at 6.7% for the year to March.

Stats NZ said in April total card spending on "consumables" increased by $60 million (2.3%), and total card spending on durables increased by $17 million (1.0%).

Consumables include groceries and liquor, while durables include items such as furniture, hardware, and appliances.

However, signs of where the higher interest rates may be having an impact come from some of the other spending figures. In April the following were down:

apparel spending was down $5.7 million (1.6%)
motor vehicles (excluding fuel), down $9.9 million (4.5%)
fuel, down $15 million (2.5%).

In actual terms, cardholders made 159 million transactions across all industries in April 2023, with an average value of $55 per transaction. The total amount spent using electronic cards was $8.8 billion.

Westpac senior economist Satish Ranchhod said the continued rise in retail spending "does, at first blush, point to resilience in spending appetites".

"However, a note of caution is needed here. Retail prices are continuing to rise at a rapid pace. That means even though consumers have been splashing out more cash, they’ve been getting less bang for their buck. Similarly for retailers, increases in operating costs have been eating away at profit margins even as nominal sales levels have climbed."

Ranchhod says he expects over coming months "spending appetites" will be challenged by the continued tightening in financial conditions. Consumer prices "are continuing to charge higher", while interest costs are continuing to rise for many households as they roll on to higher fixed mortgage rates.

"Those factors will be a significant drag on households’ purchasing power over the coming year."

ASB senior economist Kim Mundy said "headwinds" are mounting for consumers and she expected this will flow through to consumer spending as 2023 progresses.

"The housing market has yet to find a floor and living costs are set to keep climbing (including steep increases in debt servicing costs for mortgage holders). At the same time, households have run down savings which has weakened household confidence and the willingness to spend. The RBNZ has been explicit in noting domestic spending needs to slow to get inflation down," she said.

"Nevertheless, demand and supply remain out of balance and as a result, inflation is much too high. Although downside risks to the medium-term inflation outlook are building, the high starting point for inflation will see the RBNZ err on the side of caution."

ASB expects one more 25-point rise to the Official Cash Rate (OCR) by the RBNZ, taking it to 5.5%.

"OCR cuts are unlikely until well into 2024. The RBNZ will need to see ample evidence of demand cooling and inflation easing before it considers easing monetary policy settings," Mundy said.

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67 Comments

by Squishy | 9th May 23, 11:20am 1683588016

Not just RBNZ but government, by not raising income tax bands to adjust for inflation, have also denuded consumers of spending power. Much as to say it's a miracle to me that consumers have been able to sustain spending.

by morepork | 9th May 23, 11:31am 1683588713

Unintentional or not, but that's one of the few things the government's (not) doing that is actually helping to reduce inflation.

by Squishy | 9th May 23, 11:50am 1683589829

As government aren't running a surplus, and haven't broke even on a budget in some years, it's still being spent but by government instead of consumers.

by morepork | 9th May 23, 12:11pm 1683591077

Sure deficit spending is inflationary, but if they adjusted tax rates with inflation and didn't correspondingly cut services the deficit would be higher and thus more inflationary

by interesting1234 | 9th May 23, 1:09pm 1683594564

Govt are raking in all the extra tax from this to fund their insane expansion of staff and consultants. I'd have to argue that their decision on staffing in and of itself is highly inflationary to where if they trimmed down to more efficient staffing levels and amended the tax brackets for inflation, we wouldn't be in much of a different spot

by QuickFox | 9th May 23, 1:39pm 1683596350

Most of the spending in the last 4 - 6 weeks has most likely been by people who have money from insurance companies and replacing furnishings, cars etc etc from the floods and devastation around the Motu. Has the NZ Stats taken this into account, probably not I say.

by HouseMouse | 9th May 23, 11:35am 1683588901

OCR to 6%

by ChrisOfNoFame | 9th May 23, 3:17pm 1683602238

Nope. 5.5%. Things are about to fall apart.

by Justa comment | 9th May 23, 3:29pm 1683602958

Certainly no OCR cuts anytime soon, thats for sure.

by fortunr | 10th May 23, 3:21pm 1683688894

5.75% peak is my call

by Retired-Poppy | 9th May 23, 11:35am 1683588948

The reality is depressed consumers spend - it feels good!

by GV 27 | 9th May 23, 11:41am 1683589280

Everything costs more. We have to spend more to get by. This isn't rocket surgery.

by Zwifter | 9th May 23, 11:42am 1683589367

That would be rocket science.

by GV 27 | 9th May 23, 11:46am 1683589588

Not if you're really really bad at it.

by Retired-Poppy | 9th May 23, 12:55pm 1683593733

Lol:)

by RickStrauss | 9th May 23, 5:03pm 1683608586

Look, it's not brain science!

by Zwifter | 9th May 23, 11:41am 1683589304

But how many people are now loading things onto the credit card to delay actually paying for them ? These purchases come back to haunt you in the months following. The number 1 rule with credit cards is if you cannot clear the balance when it comes due, then you shouldn't be spending the money. The interest turns into a death spiral.

by OldSkoolEconomics | 9th May 23, 2:50pm 1683600642

According to the article the increase in spend in mainly on food.

Bloody peasants just keep wanting to eat.

by nktokyo | 9th May 23, 11:52am 1683589944

65% of homes do not have a mortgage.

Renters do not have a mortgage.

So good luck using this as your only tool when the government and comcom abdicated using any policy to open up our biggest rorts (food, building)/

by Von Metternich | 9th May 23, 1:18pm 1683595099

Permabulls (permaboomers?) should go to the meatworks.

Breakdown the spending demographics of the people who own mortgages and those who don't.

The majority of people who own a home and have no mortgage, will be retirees. A portion will be working age people sure. But the working age population is either renting (paying someone else's mortgage and taking the pain indirectly through rents) or paying huge mortgages. Working age people (25-55) who have kids are the productive, spending, wealth generating portion of the population. They are squeezed and in turn will be the one's not spending.

by rastus1 | 9th May 23, 2:56pm 1683601001

Many with no mortgage never had any spare cash and now that we do....still don't spend. It's a habit that got us mortgage free.

In fact i would spend less on c##p, takeaways and nice to haves than many of the family who have a hell of a lot to more to save for than I do.

by ChrisOfNoFame | 9th May 23, 3:19pm 1683602386

Your sainthood is in the mail.

by Cheetahlegs66 | 9th May 23, 10:10pm 1683627006

Jealous? It’s how we got ahead. Freehold at 41. Still driving the Honda Jazz with 199,000km and buying 2nd hand clothes. People laugh. But you enjoy the brunch and designer sun glasses whilst wearing expensive clothes.

by Pa1nter | 10th May 23, 7:05am 1683659117

But..... I heard all I needed to do was cut out avos on toast

by Shaft | 9th May 23, 3:25pm 1683602721

Yardy yardy yar. FFS... forget OCR, TD, IR, CR ..

The logic to the economy and wealth does not need data, numbers, graphs, algorithims, equations

LvM. Lets say for arguments sake you're boomers comment is 100% correct.

Then- why would you not want the next generations of booomers ( both transitioning sooner and later)to have the same benefit as the curent batch?!

After all, the housing boom /s has made as many poor/ young people gain good wealth, as it has rich investors providing rentals options for others.

And...What other options do the government provide, other than the dole, for people to gain wealth.

And lets face it some people just don't have the mental fortitude to get anywhere in life yet some broke/n refugees come here with nothing and succeed. Thats life*. Soòo

Aussie - don't get bitter - get better.

Kiwis - the reverse

* = life. Available for a limited time only. Limit 1 per person. Subject to change without notice. Provided " As Is" and any warranties are void. Non transfeŕrable and is the sole responsibility of the recipient. May incur damages arising from misuse. Additional parts sold seperately. Your mileage may vary. Conditions apply, other restrictions apply.

So, to all the wanna have's/ be's - " get of ya ass and make it happen! Suck up the crap, take the knock downs and learn.

The road to success is hard , but only you can drive it so choose your route and vehicle well!

And .. if your bumming around wasting your life, what have you got to lose, so go for it.

In 2003 @41 yo, i was broke, divorced, renting in a one bedroom shit hole under a house, and paying 3/4 of my income on child support. I lost the house i built...blah blah blah. By 2007 i was a millionaire owned several houses, seceral boats, and all done thru hard and smart firking work and i dont have an accountant!

I have'nt touched a tool since 2012 and spend winters in europe, asia, america and Aussie.

Ive got mates that have twice the ability and education than me but half the "energy/ get up and go" and they are failures because they think everything in numbers and become risk averse.

Nothing ventured nothing gained

So if a dumb ass like me can do it... any focker can

by Sibrit | 9th May 23, 4:43pm 1683607427

Not to take away from your accomplishments, as they seem outstanding even if the circumstances are not, but it seems to me that if I left everything in NZ, moved to Australia, and began working in the mining industry, didn't take vacations and did as much overtime as I was allowed, I too would be a millionaire in 4 years.

Would just be a bloody awful 4 years, and I don't think kicking back for the next 20 will ever get the dirt from under my finger nails, so while anyone can do it, it's just not for everyone and we shouldn't judge those that choose not to take that path, even if all they do is whinge.

by FCM | 9th May 23, 1:45pm 1683596747

I have been saying this, that raising the interest rates is just not effecting a bigger enough population base anymore to have a large meaningful effect on inflation. Those who are maybe renting or have small or no mortgages and have had pay increases are probably carrying on as normal.

by OldSkoolEconomics | 9th May 23, 3:00pm 1683601245

Yeah. They have to border on wiping out those with large mortgages in order for their misfortunes to have a domino effect on everyone else.... so rates have a looong way to go (they always seem to have to go way higher than expected to tame inflation.. and thats probably coz noone really knows how the rises influence total spend).

I know a few people with multiple properties who are desparate to sell. Trouble is to 'get into' the investment market over the last few years they bought properties that are hard to sell in the boom. These people are eating beanw already.

Using the ocr to dampen spend is necessary but is definitely a case of Blind leading the blind.

by ChrisOfNoFame | 9th May 23, 3:21pm 1683602499

100% agree!

The OCR is a massively flawed tool. It just doesn't work as advertised. It is however very good at transferring wealth from the poor to the wealthy.

by Shaft | 9th May 23, 5:22pm 1683609752

Its (OCR) only flawed if IT'S not WorKing for you.

Its like water meters. Their awesome when you live next to a rich guy a pòol. But the rich guy with the pool hates them

by bw | 9th May 23, 11:57am 1683590231

The RBNZ objective must be to raise the OCR by the minimum amount necessary and so put an end to CPI rises and so quell wage demands. That can be done at the next review by setting the OCR at 6%, and putting a cap on consumer demand. The alternative is to 'keep chasing' price and wages higher with an incremental OCR rise at each review and that will see the OCR go far higher than is necessary.

But will they? I doubt it.

by tronic | 9th May 23, 12:23pm 1683591834

You're right. We should have started raising much earlier when the economy was stronger and gone higher faster. Inflation can't just be beaten it needs to be strangled.

by OldSkoolEconomics | 9th May 23, 3:04pm 1683601443

Unfortunately it would onĺy have worked if done a year ago. We have mostly fixed period mortgages here so any change only affects 1 in 36ish mortgages per month. So if only 1 in 30 of us has a large mortgage Then say 1 in 900ish people will feel a signifianct direct financial impact that month.

Ocr is the way this time.. but a very imaccurate and glacial tool.

by ChrisOfNoFame | 9th May 23, 3:29pm 1683602978

Except it should be clear to just about everyone by now that the OCR isn't working like it used to. Hint: demographics! (Perhaps not clear to you though. Quote by Chaucer from the Knights Tale.)

by fortunr | 10th May 23, 3:28pm 1683689331

They know now that this is exactly what they should be doing. But they will not do it. They will stop at 5.75%.

And, as this is not enough, they will be forced to keep interest rates at such level for a long time to come. I do not see any reductions from the peak until 2025.

by nguturoa | 9th May 23, 11:59am 1683590368

Kiwis will spend no matter what. On Thursday's a vast majority get money in their account every week for the hard work they do.

Then they empty their accounts on the same day and spend it all.

Refresh my Memory, has that Thursday amount increased by what percentage in the last few months?

by ChrisOfNoFame | 9th May 23, 3:26pm 1683602767

Kiwis will spend no matter what. On Thursday's a vast majority get money in their account every week for the hard work they do.

Were you including the retired boomers, those with no mortgage, and the top 5% in that statement?

by Caughtinthemiddle | 9th May 23, 12:13pm 1683591210

Adjusting this data for the inflation underlying the problem and the OCR is biting. We are buying less goods, but that is still costing us slightly more.

by Shaft | 9th May 23, 12:18pm 1683591533

Go the boomers. Keeping people in jobs since. For ever!

by Noncents | 9th May 23, 12:22pm 1683591750

Buy it now, because the price is going up faster than you can save.

Also, the price wont ever drop back down and/or the product wont be available in future.

by HSL | 9th May 23, 1:08pm 1683594539

I’ve noticed in the supermarkets that the cheaper brands are often no longer available. Bringing purchases forward seems sensible to me, as you are right prices are only increasing.

by interesting1234 | 9th May 23, 1:14pm 1683594864

Yep the In-laws recently retired and planned everything financially for the coming decade or two in advance. They have been loading up on meat before future price hikes come in shortly (slaughterhouse increasing costs which will flow through), extra freezers to stock all the bulk food purchases in the last few months, anything like e-bikes, pet food, you name it, they have been buying up for the last 6-8months as they won't have the income anymore and prices will only stabilise once inflation is down, not drop back off.

The majority of their peers are in the same boat as they can see they will struggle more otherwise.

by nktokyo | 9th May 23, 3:05pm 1683601542

The best way to save on meat is to eat a lot less of it

by Final Account | 9th May 23, 3:12pm 1683601963

1kg Cheese down 28% at our local Fresh Choice ($18 - $13). Perhaps they overshot the mark.

by HSL | 9th May 23, 6:34pm 1683614041

Yes but a year or two ago it was 8-9 a kg, so still massive inflation

by ChrisOfNoFame | 9th May 23, 3:31pm 1683603064

You can only do that for so long. In three to six months we'll see the many can't continue to do it.

by kpnuts | 9th May 23, 12:28pm 1683592084

inflation running at 6.7% spending up 1% -- with significant increases in grocery and alcohol -- hmmm sounds like a significant reduction in good bought given grocery is up around 10%- and a move to alcohol to manage the stress of not being able to pay any other bills !

by James5000 | 9th May 23, 2:11pm 1683598280

Spending more but getting less sounds about right.

Majority of the country have to spend every cent just to get by lol, and that was a better standard of living for most last year.

by interesting1234 | 9th May 23, 2:51pm 1683600696

Then you get the shrinkflation as well: Less product AND more money -> I'm looking at you cookie time

by ChrisOfNoFame | 9th May 23, 3:32pm 1683603164

A $7 bottle of wine has a lot of calories. So it helps to keep you alive while it numbs the pain of having no money.

by RickStrauss | 9th May 23, 5:07pm 1683608852

Cleanskin's getting so pricey folk will have to resort to dirty skins?

by Middleaged | 9th May 23, 12:53pm 1683593603

Excrement and air circulation device still to make contact....

by interesting1234 | 9th May 23, 1:15pm 1683594907

I'd say we are about 1/4 turd deep

by FutureThinker | 9th May 23, 12:55pm 1683593711

Could be the 50000 new immigrants out spending maybe

by Middleaged | 9th May 23, 12:56pm 1683593813

Spending on cars down 4.5%.

That will be all the new Audis not being snapped up (be quick!) by real estate agents.

by redcows1 | 9th May 23, 12:57pm 1683593866

I don't get it, this doesn't sit squarely with the GST figures from the government revenue article. Surely as a consumption tax the GST revenue should follow with consumer spending? And no it's not due to businesses not paying GST they're gst neutral, before someone comes in with that.

by Biologist | 9th May 23, 3:12pm 1683601938

My thoughts exactly. Why is there such a difference?

by Jonny.Foe | 9th May 23, 1:00pm 1683594047

Spending is down in real terms (CPI-adjusted) despite a few hundred million dollars of tourist spending and thousands of new arrivals. Anybody dressing this up as 'households still out spending' is being wilfully misleading! Good grief.

by J.C. | 9th May 23, 1:10pm 1683594650

Can always rely on you to cut through the System 1 reactions.

by OldSkoolEconomics | 9th May 23, 2:56pm 1683600993

Great comment.

Households are just paying more for less food.. and prioritising alcohol over all other discretionary spend to drown their sorrys

by SimonRo | 9th May 23, 3:31pm 1683603084

I note that alcohol prices have barely increased when compared to rest of one's grocery shop. Well, the alcohol-free beer we like went up over the past few years, go figure.

by Zachary Smith | 9th May 23, 4:01pm 1683604869

Exactly. I bought a bottle of gin this week, made sure it was the 47% alcohol stuff and still only a little over $40 a litre. What more do you need?

by ChrisOfNoFame | 9th May 23, 3:15pm 1683602149

I wonder how much of this increase in spending is coming from either people's savings or from increases in debt?

If it amounts to a significant percentage (i expect it will for many) it can not last much longer. (Excluded - as always - are the baby boomers with no mortgage.)

Sadly - We'll know in a few months.

by bw | 9th May 23, 3:23pm 1683602588

As a child in the UK, breakfast for the 4 of us consisted of French Toast, a piece each made with one egg between the lot. That's the way it was for us and almost everyone else at school. And you know what? No one was obese. My point? There's a lot of 'fat' that can be cut before things get serious.

by ChrisOfNoFame | 9th May 23, 3:37pm 1683603421

And do tell ... Were your parents paying more than half their income in accommodation costs? And at that time, how was the safety net provided by the government and local councils - pretty good?

by E46 | 9th May 23, 8:37pm 1683621476

Better for growing bodies and brains to have more food than less. Kids being obese is probably more because of sedentary lifestyles and eating unhealthy processed foods vs a quantity issue.

by Sibrit | 10th May 23, 2:41pm 1683686518

If NZ had a proper GST set up, the RBNZ could have just upped it on non-essentials such as vehicles, whiteware, electronics, etc., and left it low for essential items like food. This would have restricted inflationary spending without sending thousands into a debt spiral, to food banks, or onto the street.