Total retail sales fell by a seasonally-adjusted 2.0% in December when compared with the prior month, according to Stats NZ.
Stats NZ said that 'core' retail spending, which excludes fuel and vehicles also fell 2.0%.
All card spending - including non-retail industries was down a seasonally adjusted 0.6% in the month.
Some notable falls in retail spending were sales of durables (down 2.0%) and apparel (down 2.9%).
Stats NZ said in actual terms, cardholders made 182 million transactions across all industries in December 2023, with an average value of $58 per transaction. The total amount spent using electronic cards was $10.6 billion.
Westpac senior economist Satish Ranchhod says retail spending was weak in December, "capping off what was a tough year for many retailers".
"Today’s data reinforces the picture of flagging momentum in New Zealand’s household sector. Key to watch going forward will be the strength of the labour market. While economic growth has slowed, unemployment has remained low, and that is likely to have supported spending appetites. However, with economic conditions cooling, unemployment is set to push higher over 2024 and wage growth is set to slow. That means the risks for spending over the new year are to the downside," he said.
Ranchhod said while the decline in retail spending was sharper than the 0.2% drop the Westpac economists had expected "in part that softness is likely to reflect the growing prevalence of sales events like ‘Black Friday’ in the New Zealand marketplace".
"Those events have seen many households shifting their spending to November (where card spending was up 1.6% in seasonally adjusted terms), and as a result spending in December now tends to be a bit softer."
ASB senior economist Kim Mundy also noted that the December fall "follows a robust November print and suggests some consumers may have done their Xmas shopping early last year".
"However, it’s very clear that the consumer demand backdrop remains weak and that the RBNZ’s monetary policy tightening is having the desired impact." Mundy says households’ budgets have been significantly impacted by rising debt servicing costs and broad cost of living pressures.
"A lift in the unemployment rate in late 2023 will have done little to help consumers’ willingness to spend.
"Strong population growth remains the key support to retail spending but has so far been unable to offset the impact of significantly trimmed household budgets.
"We don’t expect these challenges to subside for some time either. Substantial mortgage relief appears to be some way off and a further weakening in the labour market is likely to be an additional headwind to the retail sector over 2024.," Mundy says
Ranchhod says taking a look at the longer-term trend in spending, the extent of the softness in spending appetites is apparent.
"Over the past year, spending levels have effectively been tracking sideways. In fact, compared to the same time in 2022, spending in December 2023 was down 0.6%. That’s despite a population growth of around 2% and price rises of close to 5%. Putting that together signals that many New Zealand households are keeping their credit cards in their pocket," Ranchhod says.
"As we’ve highlighted before, the main factor weighing on spending appetites has been the mounting pressure on households’ finances. Consumer prices have risen strongly over the past year. There’s also been related increases in borrowing costs. Those increases have been sucking a lot of cash out of households’ wallets, constraining discretionary spending.
"Looking across spending categories, the past year has seen increased in spending on groceries, consistent with the rapid growth in the population. However, spending on durables, like home furnishings, has fallen sharply over the past year, dropping by 4%.
"Hospitality spending has been growing, but only modestly. While international tourist numbers are continuing to push higher, New Zealanders remain cautious about their spending on activities like dining out," Ranchhod says.
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