The retail spending slump appears as if it might be intensifying, based on the latest monthly electronic card transaction data released by Statistics NZ.
Stats NZ says that on a seasonally adjusted basis, total retail spending slumped 0.4% in April 2024 compared with March, while 'core' retail spending - which excludes fuel and vehicles - fell 0.7% on a seasonally-adjusted basis last month, according to Statistics NZ.
After a surprise lift in spending (seasonally-adjusted) in January 2024, the figures have now dropped for each of the past three months - reflecting a downbeat pattern in the economy, remembering that GDP dropped in the December 2023 quarter. Also remember that the population has grown substantially with the surge in inbound migration. Such a surge should, all things being equal, lead to increases in overall spending.
Stats NZ said specific movements by retail spending category in April 2024 (seasonally-adjusted) included:
- motor vehicles (excluding fuel), down $1.0 million (0.5%)
- apparel, down $5.7 million (1.7%)
- hospitality, down $5.6 million (0.4%)
- fuel, down $6.1 million (1.1%)
- consumables, down $9.0 million (0.3%)
- durables, down $11 million (0.7%).
It's worth mentioning that Stats NZ has now started seasonally adjusting the hospitality figures again - figures which were particularly badly disrupted by the pandemic and its aftermath, and hence not allowing meaningful ways of seasonal adjustment.
Stats NZ said non-retail spending was up in April.
Stats NZ said the non-retail (excluding services) category increased by $47 million (2.2%) from March 2024. This category includes medical and other health care, postal and courier delivery, travel and tour arrangement, and other non-retail industries.
The services category was up $24 million (6.8%). This category includes repair and maintenance, and personal care, funeral, and other personal services.
But going back to the retail spending - it's worth comparing the actual (IE not seasonally adjusted) figures for April 2024, with April 2023.
What those show is that for every single retail category, the amount spent was less in April this year than in April 2023. And that's even more significant than it first sounds - because the figures are not adjusted for inflation. The inflation rate in the year to March was 4.0% - so all things being equal, retail sales should have been up 4% over the past 12 months.
In fact, the figures show that durables spending was down 8.8%, apparel was down 7.9%, hospitality was down 4.1%, vehicle spending was down 1.5%, consumables was down 0.7% and fuel was down 0.5%.
Core retail spending therefore was down 4.1%, while total retail spending (including fuel and vehicles) was down 3.8%.
And, yes, the overall retail figures for April when compared with the same month of the previous year are considerably worse than those for March 2024 when compared with March 2023.
The wallets have been closed. Which is exactly of course as the Reserve Bank intended it, with the Official Cash Rate hikes and much higher mortgage rates.
Stats NZ said in actual terms in April, cardholders made 160 million transactions across all industries in April 2024, with an average value of $55 per transaction. The total amount spent using electronic cards was $8.8 billion.
The all-up transactions figure of 160 million was 0.2% higher than for April last year.
However, if we just look at the retail transactions, at 131 million - these were down 1.3% on the number of transactions for April 2023.
Westpac senior economist Satish Ranchhod said retail spending "has remained very weak".
"Despite strong population growth, spending growth has stalled in the face of financial pressures," he said.
In respect to the 3.8% fall in total retail spending over the past 12 months, Ranchhod reiterated that this was despite strong population growth "and points to a sharp fall in per-capita spending".
"In large part that’s been a result of continued increases in living costs that are squeezing households’ spending power. Those pressures include increases in the costs of necessities like rent and utilities which are draining cash from households’ wallets, even though we’re now seeing more modest increases in retail prices."
Ranchhod expects household spending will remain "soft" over the coming months.
"Households’ budgets remain under pressure from continued high interest rates and still high inflation. At the same time, the labour market is softening. Those conditions mean that spending appetites are likely to remain weak for some time yet. Signalled tax cuts may give spending a temporary boost through the back half of the year."
58 Comments
Is NZ any different?
Squeezed for Decades, America's Working Class Is Finally Up Against the Wall
The wallets have been closed. Which is exactly of course as the Reserve Bank intended it, with the Official Cash Rate hikes and much higher mortgage rates.
Yes indeed. But how well do the pointy heads really understand the impacts of those wallets closing? Do they think that their tinkering can open / close those wallets like a puppet on a string?
Why doesn't the RBNZ frame and buy the relevant data sets from the likes of supermarkets? Perhaps they do. Enlighten me if that is true.
it is working exactly as it was intended to and yes they can just switch it all back on. Behavioural economics indicates people dont always make the wisest decisions when it comes to money. We are inclined to take the easiest solution and the one that creates the most oxytocin in our brains (pleasure hormone). When the economy starts to tank, interest rates will be cut and the average family will immediately take those home loan savings of a couple hundred a month and go out and spend it on meals and microwaves and clothes and clutter.
Common sense says they should continue to keep their repayments high and pay down their debt - but myself and RBNZ are 100% confident only a tiny portion will do that.
Now as everybody races out to spend that "disposable income" it will lead to more jobs, new businesses popping up, a renewed housing market and all will be right in the world.
then in 5-7 years time the cycle will turn again and we will rinse and repeat - with not one single lesson learnt. Monetary policy is crude and imperfect but it works - hence why no substitute has yet to be invented.
"... and yes they can just switch it all back on."
No. They can't. It's not a damn light switch. It's like turning an oil tanker.
"Monetary policy is crude and imperfect but it works ..."
Crude and imperfect? Absolutely!
Works? That depends on what you're trying to achieve. Make the rich even richer? Yup. It does that. Push NZ Inc back 3+ years? Yup. It does that. Reduce investment in training, new plant and machinery? Yup. It does that. Throw lots of people out of work and reduce wages / salaries? Yup. It does that. Toss older workers into early retirement? Yup. It does that. Gut the middle classes? Yup. It does that. (I could go on and on!)
" - hence why no substitute has yet to be invented."
Total bollocks. Why not just fess up to being ignorant of all substitutes and/or alternatives?
Don't you think if the RBNZ didn’t control interest rates that interest rates could still swing around wildly? Or should they control rates but hold them near 0?
The main reason that monetary policy isn’t working is because Orr dropped rates for no reason when Covid hit. He had no evidence that Covid would cause deflation. Blame the man not the system.
As i said its crude and imperfect, the answer to why the rich become richer was also in my original answer.
Happy to hear your alternatives or substitutes. If you have some that work - you could end up being a very rich person - presuming you don't then spend it all on clothes and clutter.
Be warned though - even the RBNZ - no longer believes there are alternatives https://www.rbnz.govt.nz/monetary-policy/monetary-policy-tools/alternat…
That link is broken. (Funny how you got thumbs up with a broken link!)
Did you read it? I can not believe that the RBNZ believes there are no longer alternatives. If they said something remotely like that it would be with substantial caveats about what they believe they are allowed to do.
Of course they can switch it on and off - what do you think they were doing for the last 15 years with the borrow and spend wealth effect?
The points you make are not the fault of monetary policy (although exacerbated in an engineered recession). They are an entrenched issue in the financialisation of everything, the underlying issue of peak capitalism where financial capital rules the roost.
The middle class were already being gutted. They just did not know it as they consumed the narrative of getting rich from the price of their homes. Wages and salaries of the workers were already reducing (not keeping up) relative to basic costs of living. Investment in new plant and machinery, technology is all about reducing the human component via automation, robotics, and digital services.
The attempts to introduce alternatives have not been implemented so well and the fear is still real. The biggest fear is the loss of power and control by institutions and individuals currently sitting in the seat of command. It is literally a human conditioning issue and yes we are ignorant.
The attempts to introduce alternatives have not been implemented so well and the fear is still real. The biggest fear is the loss of power and control by institutions and individuals currently sitting in the seat of command. It is literally a human conditioning issue and yes we are ignorant.
This is why many of us are shifting our focus to be more self-sustainable, to either avoid, or lessen the impact of price shocks and inflation. The world of mass consumerism cannot continue as it has been forever, so we either make plans early and change, or reach a point of collapse and still seem to act surprised.
Perhaps the alternative was for the last govt to steady their spending and not create inflation in the first place. Its perverse to me that a govt shovels tax money taken from the workers and gifts it to their favourite entities by the truckload, creating inflation, and then makes borrowers pay for it.
This is true in NZ when interest rates are rising, due to our high level of fixed loans. Borrowers dont feel the pain until they need to refix. So a long lag occurs.
the opposite happens when interest rates drop, then borrowers will usually break their fixed term loans to get the lower interest rate. This doesn’t happen immediately but once interest rates drop about 1% you will see this becoming more common, especially for those on 2-3 yr terms. The lower repayments will usually outweigh the break fee.
so the lag effect is less pronounced when interest rates drop.
Whether they can reopen those wallets depends entirely on the severity of the crash and how mashed up people get in the process. Wallets won’t open again in a hurry if the downturn (which has been orchestrated and is well publicised as such remember) leaves scars in people’s minds and shifts their perception of risk to a point where they feel the need to ‘insure’ themselves. In other countries where they don’t trust the economic management of their leadership the population save before they spend. If NZ takes this turn - then there’s little chance that consumption will reignite the economy even if the RBNZ wants it too. It would be a big shift - but it’s possible.
We don't want the wallets reopened quite so far tho. We surely had inflation because the money supply became too great (cheap credit, printer money, covid handouts, virtual house wealth..).
So people spent spent spent money that shouldn't have existed, demand grew beyond supply for people, assets and products and we got in a mess.
So it stands to reason that we can't go back to the same level of spending.. we have to accept lower gdp and lower growth. Thus the revenue and profit expectations for everyone need to adjust lower.
Wallet may reopen... but hopefully in a more conservative, risk averse way.
Just in case anyone missed what I said yesterday:
The drop in demand is stark. Within a few months demand has collapsed. In most industries I’ve talked to, so many different people talking about layoffs, job security etc. A cosmetic surgeon (one of Aucklands leading) told me his business has evaporated on the want/need/demand side (ie anything that isn’t a must/need/insurance covered isn’t happening anymore. Flow on effect think of dentists, mechanics, building anything that isn’t necessary is having the plug switched off. The economy is already in the toilet and even when the reserve bank cuts it’s going to be far too late. I can see unemployment reaching 5% by September 30 easily.
As soon as business start realising they can’t increase prices anymore (which is now) the quick cost cutting begins and the easiest thing to cut is jobs.
I agree with your general sentiment, based on feedback I'm hearing from clients and businesses I talk to. Some are doing ok, but a widespread feeling of malaise and declining demand.
Something like cosmetic surgery I'm not surprised by, as I imagine outside of the 'reconstructive' work (that is probably funded through the likes of ACC, insurance etc) there would be a fair bit of new money - i.e. over-leveraged money - that would have been paying for purely cosmetic procedures that will instead be put off. Potentially grim times for the plastic surgery + his and hers Range Rover sport set.
I disagree with your last sentence though - marketing is the first thing to go (sometimes not bad as lots of it is wasted, but also potentially self-defeating as your loss of market share may decline faster than the overall market) along with other nice-to-have services. My accountant was complaining of this fact, e.g. clients of theirs pulling back on all non-essential services.
Once that's done though, say goodbye to the jobs!
Homebrew - can be done basic, mid tier or professional standard depending on how much one is inclined to spend in time and money on equipment and learning. I can knock out 40L of any style of lager, pilsner, or English bitter for all of ~37c/330ml in materials. Add in power consumption, C02 use and not factoring in time (which is a lot less thanks to investing in equipment), maybe ~50-60c per beer. Add in pot luck gatherings and life isn't too bad despite the economic outlook.
Card spending per capita back to 2014 levels in real terms - 10% down on the first quarter of 2020. Quite remarkable really. The downturn is starting to make 2008 look like a blip.
Things are changing quickly out there too. More firms have started to price more aggressively - but most are still downsizing to adjust to lower demand (and holding margins). See Warehouse announcement earlier this week. New arrivals are accepting crap jobs and wages and seem prepapred to live ten to an over-priced weatherboard shack. But, kiwis have seen enough - they're leaving in droves (1,000 per week net!)
We are in serious danger of tailspinning here. I cannot believe that some people in RBNZ are not weighing up the career risks. They are in danger of becoming a global laughing stock - the country that boomed out of COVID and then shot itself in the head. Surprise 25pts OCR reduction looks back on (not that it will achieve much at all).
Speaking of both the willingness of new arrivals to work for slave wages and cram themselves into crappy houses and The Warehouse, I was there the other night buying some cheap coffee beans (apparently their home brand is the reject Havana stuff, it's pretty good - well worth the saving).
The coffee beans were near the seasonal heater display, and there were about 5 tradies in hi-vis, all clearly from one particular origin huddled around a boxed $20 bar heater.
A whip round took place, and these very cold and weary-looking men had just enough cash between them to buy the heater.
The "ringleader" then got on the phone, put it on speakerphone, and in fairly clear English I could hear him asking what I presume was their landlord if they would be allowed to have a heater in their room, and how much they have to pay per week each for extra power.
It was as clear as mud from that conversation these 5 guys were all dossing down in one room in a shared house. That's 5 grown men, haggling with their slumlord (sorry I mean hard working mum & dad investor) over few dollars a week of extra electricity to power a $20 bar heater.
With no disrespect to the work ethic or desire for betterment of these particular individuals, how is importing this "scenario" any good for the country?
Its good if you are extremely wealthy, have private healthcare, a large house with private security and own rental properties and businesses that make money from cheap labour and lots of tenants... (a national donor.)
These people dont actually 'see' the impact of their policies... if their WAGs were told the poor kids were going hungry .... probably they would repeat the well worn phrase: 'let them eat cake'. As for them needing to heat themselves.. they cant imagine a world without heated floors and spa pools...
I made the same comment (well different words) on the immigration numbers post earlier today.
You are totally right.
The people making the decisions and/or influencing policy, ranging from academics, to public sector management, to business people/wealthy interests are largely immune to the flow-on effects of their beloved, but ultimately absurd immigration policy.
They live in nice parts of town, they have enough spare income to weather any increase in the cost of living, they don't have to compete for rentals with a dozen immigrant tilers willing to crowd four to a room, the kids go to private schools or the best state schools owing to zoning.
It's Benjamin Disraeli's, "Two Nations" writ large.
how is importing this "scenario" any good for the country?
Don't expect an answer too soon, I started asking this in 1999.
That said, perhaps I should just be grateful NZ isn't suffering lower housing demand and quietness [warning - the following link quotes Prof Spoonley]:
When I saw the 50k PA leaving figure - I immediately recalled John Keys speech which included the line 'something like Eden Park emigrating to Aus every year'.
It was a few years ago now - almost seems like a lifetime - but sure as eggs, here we are again - another Labour govt has cooked it completely and scaring anyone with the means and energy to clear off to Australia.
I have a job interview with an Australian firm coming up shortly...
My wife hit Wellington for a couple of days today. When she rang me to say hi she said the shops and hotel were very quiet. We certainly have a big problem economy wise. If you have a job and hate it don’t leave unless you have another one as getting a new job might not be easy to achieve.
Over in UK negative equity was common in early 1990,s lasted 10 years many people just handed back keys to bank, mortgages were much smaller compared to wages but interest rates were very high. New Zealand has put all its eggs in one basket called housing market where average 3 bedroom house in Auckland is 16 x average salary that’s even after the 21% drop from highs. People need to wake up ! the crash has only just started to get real.
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