The much awaited revival in retail spending is still taking a while to arrive, judging by the latest card spending data for the month of October.
Although there was the encouragement for consumers during the month of a jumbo sized 50 basis point cut to the Official Cash Rate by the Reserve Bank (RBNZ), taking it down to 2.50%, the only categories to see increases in spending were petrol and consumables (think supermarket shopping).
These two categories in Statistics NZ's electronic cards transactions data combined to push the overall figures for October into a 0.2% seasonally adjusted rise for retail spending, following a fall of 0.5% in September. But it's probably more instructive to look at the sectoral breakdown for the month, all figures seasonally adjusted:
- consumables, up $22 million (0.8%)
- fuel, up $2.5 million (0.5%)
- durables, down $1.5 million (0.1%)
- apparel, down $1.9 million (0.6%)
- motor vehicles (excluding fuel), down $2.3 million (1.2%)
- hospitality, down $21 million (1.4%).
Core retail spending, which excludes fuel and vehicles also showed an overall rise of 0.2%.
Westpac senior economist Satish Ranchhod said the details of the October report "point to ongoing softness in households’ spending appetites".
"October’s gain was almost entirely related to increased spending on groceries. And with prices continuing to rise for many essential food items, that’s not really an indication that households are feeling more upbeat," he said.
The softness in discretionary spending categories, with falls in spending on household durables like furnishings (down 0.1%), apparel (down 0.6%) and hospitality (down 1.4%) was more noticeable. Recent months had seen spending in those categories starting to rise, but that momentum has not been sustained, Ranchhod said.
"This will be a disappointing result for the RBNZ. Interest rates have been falling for well over a year and increasing numbers of borrowers are rolling on to lower mortgage rates. That’s been putting money back into households’ wallets. However, households are still reluctant to spend (using cards anyway), with softness in the jobs market likely an important factor weighing on spending appetites," he said.
Retail NZ chief executive Carolyn Young said that as the retail sector headed into the important Black Friday, Christmas and Boxing Day sales period, it’s going to be important to see continued improvements across the whole sector.
"We know businesses have been hanging in there waiting to see an improvement in the economy."
Young noted that with inflation currently at 3.0%, the actual card spend in October is below the current rate of inflation.
"The retail sector remains under significant strain, with businesses advising that they are absorbing as many cost increases as they can, working harder than ever as margins are being squeezed, creating significant challenges to remain open," she said.
"We are still seeing liquidations and closures across the sector, although some regional areas are showing signs of improved trading on the back of strong dairy prices. We remain hopeful that the Reserve Bank’s recent OCR cut to 2.5% signals potential relief ahead. However, retailers are not noticing any immediate change in consumer spending."
In other detail from the October figures, the non-retail (excluding services) category decreased by $7.2 million (0.3%) from September 2025. 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 $0.2 million (0.0%). This category includes repair and maintenance, and personal care, funeral, and other personal services.
The total value of electronic card spending, including the two non-retail categories (services and other non-retail), increased from September 2025, up $2.6 million - although this was such a small rise it didn't register in percentage terms.
In actual terms, cardholders made 181 million transactions across all industries in October 2025, up from 180 million in October 2024. The average value per transaction was $54, which was down from an average of $55 for the same month a year ago.
The total amount spent using electronic cards in October 2025 was $9.725 billion, which was down 1.1% on the $9.83 billion spent in October 2024.
Among the retail categories, only the figures for consumables and hospitality were in actual terms higher in October 2025 than in October 2024.
The figures for durables, apparel, fuel and motor vehicles were all lower than for the same month last year.
And remember, these figures aren't adjusted for inflation, so, any price rises would be expected to produce higher year-on-year figures.
17 Comments
There is a strange and illogical belief in NZ that lower interest rates will cause consumers to spend and businesses to expand. Ignoring the fact that private sector debt is off the charts and clearly at the peak of the debt cycle.
There is no other economic factors required apparently. Let's say you run a business that has experienced 2 years of falling demand but - hey - interest rates are low, let's employ some more staff.
You're a consumer you work for a business that is struggling and is laying off staff - but - hey - interest rates are low, honey - let's take on more debt for a new jet boat and car.
I think anyone would be silly to think there's just one component to rule them all regarding the economy.
But we can also see higher levels of consumption and business activity in a low interest environment compared to a higher interest environment.
The illogic comes from a belief that the economy reacts instantaneously to interest rate changes. Like, it might a smidge, but the full effect is a year or so down the line.
Interest rates are a response to economic conditions - they are not a contributing factor to those conditions - in my opinion. I believe that is exactly what the next 6 months will prove. No economic recovery and rising unemployment. The immigration stats tell you everything you need to know - the NZ economy has stopped in it's tracks and has nowhere to go.
So interest rates can keep being lowered then? Back down to 0
That is pretty much exactly what happened after the GFC and growth and inflation did not pick up significantly at all for 10 years - until COVID deficit spending. Go figure.
That is pretty much exactly what happened after the GFC and growth and inflation did not pick up significantly at all for 10 years
Are you sure? If you believe inflation is measured by the CPI construct, you're possibly correct. But if the money supply is increasing, you have to have rocks in your head to think that inflation is not increasing. The Ponzi is your inflation in Aotearoa.
So while we're lambasting people that think low interest rates are a cure all
If we look at various nations level of deficit spend
Can we draw any conclusions about whether endless rounds of deficit spending result in a superior outcome? We can maybe find some examples. But as a general rule, it's something that might get an economy out of the shit short term, only to cause long term headaches.
Keynes' approach was a direct response to a lack of much central response to the great depression. That would've been less harmful if there was a level of govt spend.
The only thing is, we're now nearly a century on from the practice of governments juicing economies. Rather than being a tool in extenuating circumstances, it's now the expected response, with diminishing returns. Keynes did not envisage a globalized world with industrial parity.
Actually, if you look at economic historic data since WW2 for nearly all modern advanced economies - government deficits are standard and normal - surplus is rare and occasional and is the result of very strong economic growth - not government spending cuts.
One way to think of it is as an overdraft - most largescale business do the same - the overdraft allows operational spending to take place without a dependency on the other variables and inputs that occur over time.
I understand the concept.
But just as you say interest rates alone dont drive an economy, the sort of deficit spend you want to fill any economic downturn, has to be paid back at some point. Either the private sector needs growth as a fairly high level once it rebounds. Or that deficit spend needs to provide some sort of lasting net economic benefit - which is fairly unlikely if you're just injecting public funds short term to gloss over an economic contraction. You're effectively borrowing for short term consumption so as to not feel broke, not a great strategy.
We are seeing some very diminishing returns from that public spend. If we take education for instance, after a few decades of pushing a "knowledge economy", graduates have near doubled, while graduate job positions have halved, to the point where a Tertiary education is a very marginal economic decision, outside of a few niche fields.
private sector debt is off the charts and clearly at the peak of the debt cycle.
What is this "debt cycle" ye speaketh? Aotearoa’s household debt to GDP ratio has increased threefold since the early 90s.
If there is a cyclical nature to this, that would suggest the ratio would decrease for the next 35 years.
How can the Ponzi exist if that were to happen? It couldn't. Private and h'hold debt must continue to accumulate relative to national output for the Ponzi to survive.
My prediction - ongoing economic stagnation. There is a demand vacuum that the private sector is slowly but surely getting sucked into and has no ability to escape. Government deficit spending will have to increase before any genuine recovery takes place in NZ.
I think it will take house prices starting to increase before consumer spending increases. Falling house prices make people feel less wealthy and vice versa. I think this effect is not being fully considered by many (not you necessarily).
It's the feeling, and the general increase in activity.
I can definitely see that occuring (construction sector), and yet the government has its wallet shut.
Obviously though, not as immediate as a large amount of government money injection.
Increase in house prices = greater access to debt via anyone with any equity, ergo more money loaned into existence to flow around. An interesting notion to think that the more prices increase the more people spend money they don't have.
If there is not some material improvement in the next 12 months we could easily see a govt change. With the flag of capital gains taxation now firmly raised, will those topping up mortgages (yield loss) hold. Anyone renting or otherwise locked out of the housing market just has to change their vote and it will happen. Perhaps the questions of whether Australian domiciled kiwis (600-700k) be allowed to vote needs to be asked.
Anyone capturing that vote could swing what ever they want.
Anyone renting or otherwise locked out of the housing market just has to change their vote and it will happen
The existence of a capital gains tax is not evidenced to improve housing affordability or home ownership rates.
Nor LVRs
Or DTIs
Sounds like you should be promoting a land tax then?
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