New Zealanders spent more with credit and debit cards in September than August in the lead up to the October 1 GST increase, Statistics New Zealand said today.
ASB economist Christina Leung said the increase was more modest than that seen before the 1989 GST increase from 10% to 12.5%.
The total value of electronic card spending rose by a seasonally adjusted 1% over the month, led by a 1.4% increase in core retail spending.
Spending in the wider retail industry, which includes motor vehicle-related spending, rose 1.5% over the month, while spending in non-retail industries fell by 0.4%.
Last week ANZ forecast a 2% rise in card transactions, ahead of the GST increase.
Meanwhile, unadjusted figures show the value of total electronic card transactions were up 4.8% in September from the same month a year ago. This was the third highest annual change for any month since October 2008 (March 2010: 6.7%; Dec 2009: 4.9%).
Core retail spending with cards rose 5.2% from a September last year, the highest annual increase since October 2008.
Leung said the rise in retail spending was led by a 4% increase in spending on durable items over the month, which likely reflected households bringing forward purchases of major household items before October 1.
The extent of the spending lift appeared modest compared to the 1989 increase in GST from 10% to 12.5%, she said.
However, there would likely be some unwinding in spending over coming months, with a decline in spending on durables likely in October, she said.
"Nonetheless, the broad-based nature of the improvement in spending in September suggests the recovery in retail spending remains in place. This is encouraging in light of the subdued results seen in recent business surveys, and suggests retailers' expectations of an improvement in sales will eventuate," she said.
KPMG GST partner Peter Scott said he expected retail sales would improve in October and into the summer months on a flurry of spring sales:
Electronic spending figures released today by Statistics New Zealand show that core retail spending in New Zealand has increased in September, with credit card spending down.
KPMG, GST Partner Peter Scott says, “While some of the increase reflects the spending ahead of the GST rate increase (e.g., furniture, appliances), this increase looks modest compared to 1989 when there was a significant surge in consumer purchases prior to the rate increase. For instance, in June 1989, spending on appliances was 35 percent higher than it had been a year earlier.
“While the data reflects the current cautiousness of consumers, with various confidence indicators in New Zealand trending upwards, I would expect these figures to improve slightly for October and then again as we enter the summer months. I would expect the number of people spending to increase, without the average spend trending upward necessarily.
"Retailers should be spending more time planning strategies to encourage consumer spending as we enter the summer months - and focusing on their conversion of browsers to customers. I would expect a flurry of Spring sales to hit the streets and for retailers to continue to get creative with their marketing spend. One thing is clear, the retailers who are planning well ahead, will be the ones who reap the rewards.”
(Update 2 includes KPMG comments)
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