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.
86 Comments
Buy Pushpay here?
If CPI stats are still high in Nov, RBNZ will not be able to lower OCR, unless they are prepared to disregard their only single mandate to fight inflation..... I think the bad NZ economic news might will come well before inflation falls, and by the time inflation falls the goose will be well plucked.
There is a very real risk that things RBNZ are modelling / tracking go non-linear..... from which recovery will be long and painful.
It's very hard to let air out of a housing bubble slowly.
If you take any notice of the media it's flowing through immediately, as this new Govt has been in office for a couple of months {December & January excluded holiday period} and they are getting blamed for everything! I've never ever seen such outlandish critisisim like this ever before! to any incoming Government.
That collapse in discretionary spending is now steeper than after the GFC. This is getting completely ridiculous now.
We have around a third of adults getting hammered by RBNZ and the cost of living, another third getting milked by landlords and the cost of living, and the rentier class chinking glasses, going out for nice meals, enjoying the discounts at Freedom Furniture, and importing thousands of Teslas. Meanwhile, the new and clueless Govt is pursuing austerity like that will save their souls rather than send the country down the toilet.
It's almost unbearable to watch.
The issue with shovel ready projects, is we do not even make the shovels in New Zealand any more, and New Zealanders are too lazy to do the shovelling.....
They only have two levers, OCR and Tax rates, to stimulate here..... NACT can pull the tax lever and claim a win, even while inflation is above band, RBNZ cannot touch OCR above band, so NACT have a limited time to get their tax cuts done..... and claim they are part of the solution. It will not save the housing market but they (now say) want to see it lower anyways. The smart in NACT want to buy this dip, buying a big dip is always the safest way to enter a market, as the gov of the day normally releases a stimulus package at some point near the bottom.... NACT voters have seen it all before, it's not their first rodeo... they will through the over leveraged to the sharks if necessary and call it market economics. OCR will probably hit its low point about when houses become cash flow positive.... and the ponzi (NZ Economy) can start again.....
They have a spending lever - they have nearly $30bn sat in the Crown Settlement Account and the ability to unlock that with a simple budget vote in Parliament. But, they're stuck in a small state, ideological, austerity mindset. We will be a case study in how NOT to handle the emergence from the global inflationary period.
Everything in the theory says gov should step in to spend as public pull back, the trouble is Labour got out of sync and spent a lot, these guys went in with an austerity mandate, things have changed, we will see just how mature Willis is in the first budget. In my opinion we need to pull forward roading projects (motorway to Whangarei) , perhaps a 2nd AKL crossing, new Ashburton bridge etc etc
Now maybe a time to think bigger re another hydro dam or just make Te Anau a bigger dam...
Lets make a NZ Made school prefab plant....
Lets decide which hospitals need rebuilding and why
We could spend money on water infrastructure (we may need that one day)
For sure Labour spent billions on .... not much, but spending nothing while public spending drops away is a sure fire way to deepening the recession. Interest de ductability is going to kill off new builds, who would take that risk now.
Luxie talks a good dynamic game, let's just see how dynamic he can be. I am worried that this National lot are more steady state planners than crisis managers.
Labour's spendthrift behaviour is like the jab that has set up National to come through with a nuclear right hand of poorly-timed austerity and put the economy on the canvas.
Pissing so much money up against the wall with an approach of '$ in must automatically mean something beneficial out' combined with poor delivery of meaningful, tangible outcomes for the average pleb means - somewhat understandably - a lot of the voting public sitting there being jaded to the promises of 'we just need more money, and more time, to get the job done'. Thus an easy job for National & ACT to beat the austerity drum and raise support, as we saw pan out at election time.
At the end of the day you can't realistically expect the average voter to understand the sort of concepts that commenters like Jfoe and yourself have made on this post (unless, of course, you are hanging around the brains trust that is the interest.co.nz comment section, wink wink). I suspect for a great many voters it was a case of saying 'Labour has wasted a lot of money, now it's National's turn to try and save some as we may as well give that a go', and nothing more complex to the thought process than that.
Out of sync, recklessly wanton spending, and now out of sync, recklessly wanton austerity - brought to you by the same clowns wearing different coloured shoes.
The sad part is had Labour actually delivered a bit more (e.g. if I could have jumped on a light rail train from Auckland airport to CBD last week as opposed to going in some rancid Uber) most non-blinkered people wouldn't have minded some waste, and some largesse ... but alas.
Lol
what a s$&#show that was
They didn’t even build them, haha. Reliant on the market
David Shearer, a proper left-winger, conceived of KB as a government house building programme. That would be based on mass prefabrication. Entirely sensible
Almost never hear about mass prefabrication these days
Exactly. We need to work out where we get the most immediate and long-term return on the investment of our limited actual resources. For example, do we 'spend' 20,000 construction, roading, project, design, and infra workers + billions of tonnes of aggregates + depreciation on vast amounts of plant and equipment on... building wider roads? Or do we allocate that resource to housing development, water infra, hydro, wind farms (and, yes, I know the skills don't match perfectly)?
Obviously no-one knows how to calculate that return on investment into $$ numbers. Therein lies our narrow minded investment mindset - the quick return of $$ rather than optimal societal outcomes. Society is obviously not a business model, cannot be fit into an economic model, yet that's what we keep expecting.
Agree with the opening statement, but just an aside on "New Zealanders are too lazy to do the shovelling...."
There was a time - not that long ago - that your average, or even-below average, working Kiwi could get on provide adequately for, and even purchase a house for, their family. That construct is no more - not by a long way - no matter how hard they shovel.
Puddle - and the reason largely lies in the burecratic obstruction, over regulation and delays of decision making. Ask the rural community to repair the local school and watch it done quickly, economically and with quality, ask the local council and wait years for approval budget blowout and a crap result.No 8 wire is still alive - just - just add oxygen of common sense and fuel and watch the fire grow without further interferecne.
You seem to be referring to interest deductability for landlords - Labour discriminanted on the basis of - we hate landlords making a profit or letting property is not a business, in whihc case any profit is not a taxable event - you could say its a hobby especially for Mom & Pop landlords with 1 or 2 rentals.
The new government is not just pushing austerity for others, key figures are exhibiting entitlement to taxpayer money at all points, while they're cutting services to Kiwis to fund tax cuts for property speculators (also at great benefit to MPs' personal property investments).
Rules for thee, not for me.
With a population increase of 2.8% the implications of a negative trend in spending are very very significant.
Flying into Auckland yesterday from LA the AirNZ plane was mostly empty, and according to the airline staff on board this is not unusual. The local hospitality trade here in the regions is dire.
If the 1st OCR isnt cut until November then most likely by that time we are trying to resuscitate a dead beast.
As much as I would hate for the housing market to take off again - and with it the unhealthy cultural habit in NZ of exploiting the housing sector to make money - a rate cut in the current period is desperately needed if we are to stabilize the economy and aim for growth from the back end of this year.
Re: flights, I've been booking some to travel and see family later this year and it's crazy how many more "deals" (across both economy and the premium cabins) there are versus even a year ago.
Air NZ has been offering some comparatively sharp pricing on premium economy and business class for some routes, for example - not that long ago there were borderline bidding wars for those nicer seats.
The combo of the post-Covid travel rush having worked its way through the system, and then people who might have not long ago been in the position to travel but who have to tighten the belt now, seems to be having an impact.
Yep this is what I wound up booking. Normally I'd go cheapest tickets on a decent carrier (e.g. Singapore or Air NZ) and then do a stop over each way, but as I'm limited for time and have to be there and back within one week I splashed on some premium economy tickets.
Cost me $1000 more than economy + selecting better seats would have done, which I consider to be a very reasonable deal.
Some of the business class fares were very tempting, but I figured that's a bit indulgent and still several thousand more than premium economy.
Bingo. Remember, immigration has been the easy fix to pump GDP and make the numbers look rosy. The ruling elite gets to show the sheeple the GDP scorecard as evidence of how well they're doing as economic managers.
Team Cindy tried this stunt all the time (and the 'wellbeing' framework never eventuated). The sheeple and the media lapped it up. Of course, those who follow interest dot co knew better.
Major issue is that many immigrants are the family of current visa worker, said 6 and 9 year old will not increase GDP, and wife is more likely to work a rest home carer position then be a civil engineer..... On a per person basis they may be making things worse by not even spending at current average levels.....
Im a wholesaler, we have seen a 15% drop in sales this FY, and some nice to have items are down by 25%. Our import spend dropped by close to 50% (sitting on too much inventory last FY end). Retail feedback is the brakes are on hard. Budgeting this year is a darts exercise...
As reported here 2 days ago. Non-performing SME loans increased 92% from $422 million to $813 million in the six months to January. It's going to keep ticking higher and the majority of these loans are secured over residential properties. These businesses are reliant on our spending. There is no demand for wants amongst the bottom 60%. They can only spend on needs.
This is an ingrained problem, so many SME's backed by residential mortgages, its insane. During the halcyon daze lots of people bought themselves an income, it would be interesting to see how franchise's are faring. In my little neck of the woods there appears to be many cracks.
We all agree, but its disingenuous to then conclude that house prices are going up this year....... or next or even the one after that....
One side is at least consistent in their economic view and its impact on house prices.
The spruikers are in lala land and even a pro like TA has finally cooled his MUNTED jets after the recent flood of pent up supply has been met with dismal demand, and broad unaffordability.
This fall off in retail demand is the 2nd to last nail in the economic coffin, the last being a massive spike in unemployment... its coming.
By then any OCR cut will be way to late to re-employ these people, and a deep recession will be baked in.
All this assumes that their is no serious external shocks coming our way from the US, middle east, Russia or China, Anything external and we are PROPER MUNTED.
Well put.
Also I don’t hear many economists saying the economy will be munted
if your starting point is a munted economy and interest rates that will not fall much this year, if at all, then it becomes pretty hard to mount a logical argument that house price rises will be 5 or 7 or 10%
The RBNZ is holding the OCR at 5.5% because they believe we still have an output gap so large it is causing inflation?
The output gap can close for two reasons.
1. Production capacity increases to close the gap. This is good.
2. There is no demand because nobody wants to (or can't afford to) buy anything. This is bad.
(Or a combination of the above.)
Anyone want to guess where GDP will be for Q4 2023 and Q1 2024 (and Q2 2024)?
And 'down the toilet' is not an acceptable answer to win the chocolate fish. You have to say how far down it will be.
Edited: We could do a Japan where business investment is so great that it picks up the slack left by consumer spending. (It won't. But I thought a thought experiment might be amusing and lighten the mood.)
ANZ prediction.... they are normally pretty good at forecasting the future..... 8)
I will take -0.3% please for a virtual choc fish
NZ Q4 GDP Preview: services momentum key
- We’ve pencilled in a 0.1% q/q expansion for Q4 production GDP, weaker than our previous forecast of 0.4% but a smidgen above the RBNZ’s February MPS pick of 0.0%.
- For the RBNZ, the details will matter. The February MPS forecast for expenditure GDP is +0.2% q/q (ANZ: +0.3%), with private consumption expected to come in at -0.5% q/q
(ANZ: -0.6%). Should headline GDP come in stronger than the RBNZ expects but it’s driven, say, by weaker imports, this may not be as hawkish as the headline suggests.
Its hard to believe how we make so much milk yet so little artisan cheese, until you read the tactics the main milk suppliers used to stop the industry.....
We are taxing artisan craft brewers out of business.
try inventing a product that competes with fletchers here in NZ... even if its innovative and more efficient.
The best thing to achieve your aim would be tax reform , focusing on incentivising R&D and introduction of capital gains tax to act as a stick to the non productive asset investment. Labour did not have the balls and lost ANYWAY.... to focused on social engineering and iwi empowerment.
- We need first 15k earning in NZ tax free to get people off benefits, (keep taxing ENTITLEMENT - benefits at the same time.... (see how this could work, if you work you get less tax)
- Get rid of WFF its social welfare for employers
- introduce a capital gains tax on property, including anything over 2mil family home.
- No cap gains on business creation or sales if they employ people and pay paye.
- GST off new builds
- Rezone all of NZ so we can build on cheap land.
You have to literally rewrite the rules of capitalism and the economic beliefs - it's all been a form of social engineering since inception and especially since the introduction of neoliberal economics.
But that aside we also need a supportive and encouraging environment, not pushing the standard "success" belief but empowering real change. Is money enough of an incentive for that or does it require something else? Do penalties and sanctions really encourage or just add more negativity?
Sometimes the mentor/leader needs to step up too.
A little anecdote... My son and his friend developed a product for a high school project that won them MBIE grants and access to mentors from one of the investment/venture organisations. MBIE subsequently cancelled the grants blaming the individuals for not following through over a certain timeframe. Nothing was heard from the assigned mentors. Granted there is a requirement for personal responsibility but it takes two to tango. Both individuals were head students with sports and social commitments and progressed into University. Am I expecting too much that some extra guidance from the other parties would have been reasonable?
While at University my son was invited into a business challenge where he further revised the business plan and product. He won 3rd place providing him with legal assistance for developing IP on the product design. This time also given the run around by the legal firm.
Now I know my son wasn't passionate about creating the business himself. He was more into the design and project side and focused on his studies and personal path. The product itself IMO was highly beneficial. I know my son also has some personal life experiences that may have held him back from being more assertive in pushing for results. Yes this is only one story, but for every "success" out there how many others with ideas and potential are falling through the cracks for various reasons. I don't believe the standard economic or business perspective is the single answer when it comes to developing people to achieve their best, and not what others think their best should be.
As one who has developed IP, I suggest that you can do a lot on your own.
Now I know lawyers will tell you this is not the case - but really you can, they are just not the ones clipping the ticket.
IP can be researched - the national and international data bases are available, patents can be written, there are a few wrinkles to learn, but they can be learnt (lawyers have done it for a start) and it's not rocket science - you know your topic claims (designs, trademarks) and competing documentation far better than someone handling your case for an hour or two of billed time before moving on to the next.
It's a long process - read plenty of patents in the field and research cited documents and most importantly claims - but it can be done and patent offices (my experience is from offshore) are full of helpful to people assist you along the way.
It is also a rewarding process, best of luck and take the time to learn if you want to go down this route.
From the February 2024 MPS ...
Economic growth Production
• We assume that production GDP did not grow in the December 2023 quarter. Government consumption, private consumption and investment are expected to decline. The continued recovery in exports and government investment are factors supporting GDP growth. The stock of produced goods (inventories) is also expected to fall by less than in the previous quarter.
• Weaker-than-expected growth in the September 2023 quarter translates into a lower estimate of capacity pressures and a steeper fall already having occurred than assumed in the November Statement. However, this is only slightly lower than assumed in November given that the downward revisions to GDP also imply potential GDP has been lower. We estimate that the output gap peaked at 3.9 percent of potential GDP in the September 2022 quarter and has turned negative to -0.5 percent in the December 2023 quarter.
• We expect close to zero quarterly GDP growth in the December 2023 quarter, with high interest rates dampening domestic demand. However, quarterly changes in GDP are highly uncertain. For the June 2024 year, annual GDP growth is projected to slow to 0.3 percent before gradually increasing over the rest of the forecast.
• Over the medium term, the productive capacity of the economy is expected to improve, increasing economic activity. In large part, this is supported by strong population growth through net immigration that adds to labour supply.
• We expect the output gap to become negative from the December 2023 quarter after a sharp drop in the September 2023 quarter, with actual production lower than the economy’s potential. An extended period of below-trend growth is expected to be necessary to reduce labour market pressures and see our inflation objective met sustainably over the medium term.
These folk need to get out more. What form will their mea culpa take?
Source: Page 46, https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/…
But tanking the economy and putting 000's out of work is the right thing to do?
With inflation clearly trending down, combined with further economic contraction, wouldn't the *right* thing to do, be to ease the OCR from such contractionary levels?
Or perhaps you're a fan of collective punishment?
But tanking the economy and putting 000's out of work is the right thing to do?
The powers that be think it is. And to be fair the collective actively chose to put themselves in this position. Obviously it's a flawed model with flawed tools and we don't know any better. Is the economy actually tanked or is it the processes and ways that are not fit for purpose? The physical elements will all still exist so it's only the monetary aspect that must be creating the problem. How do we change this?
If the OCR were to be eased, by how much? Will we see a reduction in the price of everything (ie deflation) or will everyone keep milking it? Face it, even if/when we get back to 2% inflation everything is still too expensive. Will the increase in demand just create more inflation? Will everyone pile into property again?
What's the "right" thing to do?
"The softness in spending highlights the squeeze on households’ spending power from higher inflation and interest rates."
A symptom, not the cause. It's the debt that is the problem.
Aside from the flawed economic growth model itself, the economy relies on retail spending of all kinds, services or goods it's all the same. Some are just captured markets and some are not. It all requires disposable income and maintaining the purchasing power of our money. The biggest cost of living is shelter and we've really fucked that up.
We're still not addressing the real cause. It is literally the profit model, the "investment" model, the asset inflation model - the financialisation of everything. The pursuit of ROI on expanded value bases is the driving factor of our cost of living - this is the only thing trickling down in our trickle down economy.
Add in the increased "needs" to participate in our economic society without the increased incomes and the shortfall has to be funded by debt.
Intelligence without wisdom is stupidity.
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