Total retail spending slumped 1.8% on a seasonally-adjusted basis last month, according to Statistics NZ.
This continues a volatile pattern, with sales having bumped up 2.0% in January when compared with the prior month.
However, the 1.8% fall in the latest month is the equal highest drop in the past 12 months, with spending having also fallen 1.8% in December 2023.
Unquestionably therefore, the overall pattern is fairly downbeat.
Comparing the actual spending figures for February (a leap year month so there was an extra day) with February last year shows that they rose by 2.5%. But these figures aren't adjusted for inflation. And the annual rate of inflation as of the December quarter was 4.7%.
Westpac senior economist Satish Ranchhod described the retail spending as "weak" and he said the 1.8% fall in February "was an even deeper fall than we had expected".
"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% and continued increases in international visitor numbers," Ranchhod said.
"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 other detail of the latest month's figures, Stats NZ said that 'core' retail spending, which excludes fuel and vehicles also fell 1.4% on a seasonally adjusted basis, following a 2.0% rise in January.
All card spending - including non-retail industries was down a seasonally adjusted 1.9% ($176 million) in the month - and that's the biggest monthly percentage drop since May of last year.
By retail spending category, movements were:
- consumables, down $23 million (-0.9%)
- fuel, down $21 million (-3.7%)
- durables, down $15 million (-0.9%)
- apparel, down $5.1 million (-1.5%)
- motor vehicles (excluding fuel), up $0.7 million (+0.3).
Stats NZ said the non-retail (excluding services) category decreased by $55 million (2.4%) from January 2024. This category includes medical and other health care, travel and tour arrangement, postal and courier delivery, and other non-retail industries.
The services category was up $5.1 million (1.5%). This category includes repair and maintenance, and personal care, funeral, and other personal services.
Due to the lingering effect of the pandemic on tourism Stats NZ suspended reporting seasonally adjusted figures for the hospitality category. But these are now actually going to be resumed with the figures for the current month - which will be released in April.
However, in terms of actual figures and comparing February 2024 with the same month in 2023, Stats NZ said spending in the hospitality category increased 8.6% ($101 million).
In terms of actual overall card transactions made across all industries in February 2024 there were 160 million, with an average value of $55 per transaction.
The total amount spent using electronic cards was $8.8 billion, up 4.9% ($409 million) from February 2023, but bearing in mind, again that February 2024 had an extra day of trading as it was a leap year.
Westpac's Ranchhod said looking across spending categories, the biggest slowdown has been in interest rate sensitive and discretionary areas.
"Spending on durable household items (like furnishings) was down 0.9% in February and has fallen around 8% over the past year. There’s been a similar drop in spending on apparel.
"Grocery spending has been more resilient. However, our discussion 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.
"Hospitality spending has held up, but even on this front momentum looks muted. After rising rapidly when the borders were reopened, international tourist numbers are now growing at a more modest pace. At the same time, New Zealanders remain cautious about their spending on activities like dining out."
Ranchhod said that overall, the latest spending data reinforces the picture of softening domestic demand.
"We expect households to remain cautious with regards to their spending over the coming months. That’s likely to be compounded by the softening in the labour market already in train."
ASB senior economist Mark Smith said he expects overall consumer spending volumes to "continue to contract on a per-capita basis".
"Discretionary spending (notably consumer durables) is expected to remain under the pump as households focus on the essentials rather than the nice to haves. Household income growth is slowing as the labour market cools.
"Monetary policy is working in slowing consumer demand and is helping to squeeze inflationary pressures out of the system.
"Nevertheless, we expect that the RBNZ [Reserve Bank] will err on the side of caution and will not relax interest rate settings unnecessarily. We expect OCR [Official Cash Rate] cuts to begin from November," Smith said.
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