The full impact on the retail industry of the lockdown has been revealed by Statistics New Zealand - and it's as ugly as you might imagine, with spending roughly halving.
Stats NZ says retail card spending across the country fell more than $2.6 billion in April as non-essential businesses temporarily shut during the lockdown.
“The significant fall this month was not unexpected. The record decline in spending was a direct result of businesses hibernating because of the Covid-19 lockdown,” retail statistics manager Kathy Hicks said.
Total retail sales fell $2.6 billion (47%) in April 2020, after adjusting for seasonal effects.
This is the largest fall in both dollar terms and percentage change since the series began in 2002.
"The $2.6 billion drop is the equivalent of each person in the country spending about $520 less in April than they did in March," Hicks said.
Westpac senior economist Satish Ranchhod said with the Alert Level having already been rolled back to level 3 and a shift to level 2 on the cards, "we do expect to see spending picking up again over the next few months".
"However, we don’t expect a return to pre-Covid-19 levels for some time. That’s due to job losses and general nervousness about the economic outlook, which will dampen spending appetites. Continuing border restrictions will also be a major drag on spending in areas like hospitality."
ASB senior economist Mark Smith commented in a similar vein:
"With NZ currently at Alert Level 3, and soon (hopefully) to move to Alert Level 2, some of the shackles to consumer spending are being loosened. Consumers are rediscovering they have more options available and pent-up demand will be strong in some retail pockets. Unfortunately, this looks set to be a temporary respite for many embattled retailers," he said.
"The impact of sizeable and widespread job losses, weak income growth, reduced job security and weaker balance sheets will instil considerable caution within the household sector with an eye on the weaker economic prospects ahead."
All industries showed unprecedented falls in April. Furniture, hardware, and appliances (durables) led the retail industry falls in value, down just over $1 billion (72%) from March this year.
Hospitality sales, including accommodation, cafes, and restaurants, had the next largest fall, down $721 million (93%).
"New Zealand was under the level 4 lockdown for all but the last three days of April. The impact of restrictions on the number of overseas visitors to New Zealand contributed greatly to the hospitality fall," Hicks said.
"A small recovery in hospitality sales happened because people could buy takeaway food through contactless payment, when the country moved to level 3."
The restrictions on non-essential travel for the month, as well as lower pump prices, saw spending on fuel drop $291 million (60%) compared with March.
Grocery (consumables) sales had the smallest percentage fall in April, down 11% ($275 million) from March.
"Supermarkets and grocery stores were open as an essential service trading through the entire lockdown," Hicks said. "Those stores alone accounted for more than 80% of total core retail card sales."
"The fall in April spending follows a particularly strong March month, with widespread reports of people stocking up leading up to the lockdown," she said.
In actual terms, consumables are up 9.6% ($192 million) on April 2019.
The average value per transaction rose to $73 in April, the highest value since the series began, over $20 dollars higher than the average for the last decade.
The total number of card transactions for the month of April was 50 million, which was approximately one-third of the average monthly card transactions for the last five years.
"Due to social distancing and efforts made to go out less, people were making fewer purchases with a higher transaction value," Hicks said.
In actual terms, total retail spending using electronic cards was $2.9 billion, down 48% ($2.6 billion) on April 2019.
Hicks said spending on both eating out and accommodation away from home was almost non-existent in April .
The decimation of the travel industry was also highlighted. For the first time, travel agency and tour arrangement services spending fell to negative numbers. This is because the value of refunds received exceeded purchases.
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59 Comments
This rather reinforces Michael Reddell's assertion that L4 would cause around a 40% dive, and a GDP reduction north of 20%.
It is OK, I have a solution, We will employ more Politicians and Import more Banks. Oodles of Money.
There you go....Fixed!. (I use the word Fixed in in in a Gamblers wish way...Cannot lose...and they don't...the Economy is so fixed already).
When Sky Tower needs more Gamblers to make it pay......a TUI may say..the Sky's the limit.
(I say....the Kiwi way....Who needs em...anyway....Stuff em! they have all been Bailed out....Before...have they not).
For any type of marketing to work, it has to be supported by spending.
For this reason, advertising revenue is way down. Roadside fruit and vegetable stalls have probably seen an increase in turnover. More farmers markets should be encouraged by the authorities, as it ensure the spend and profit is contained locally.
Unfortunately, these franchise models are a cancer on the local communities, with all the cream exported to the head franchisor; just another pyramid scheme when most of the profit goes offshore to the top.
Buy locally produced goods and services, to keep jobs and profits local.
'Marketing' - um - what? More consumer junk? Gaming and gambling to fulfill the 'circenses' bit of Panem et Circenses? Stoop labour on Vegetable Farms? Need specifics - unemployed waitrons cannot live on Promises of Utopia.....or airy generalisations (unless, of course the /sarc tag got left off?)
Yes but *shuffles paper* knowledge economy? Wait, no, student debt knifed that one... ummm *more shuffling* digital divide! hang on, must be something better than that here.... web 3.0? no, that's no good..... ah, here we go, knew it was somewhere here in this government department brainstorming session notes we made... digital well-being!
Actually, what was the question again?
More economic productivity in what area exactly? primary industries (already saturated)? construction and civil work (already saturated)? public services (have always been saturated)?
When people talk about NZ, you think that it is in middle of the silk road, with a local market of billions of dollars of purchasing power, secure access to energy and raw material, able to influence the global politics in its favor, is in a favorable trading position etc, yet it is unable to fulfill its massive potential.
NZ is doing great with what it is good at: primary industries. Can you let me know where is this huge potential for "economic productivity" that NZ continues to fail to fulfill?
We've proven remote working works. Why can't we provide information services to the US, UK and Europe? We have a well educated population and excellent internet infrastructure (in towns and cities). We may need to attract some extra talent but our celebrated quality of life should help with that.
Maybe we should open our doors more to highly skilled tech workers and less to unskilled workers (petrol station attendants, delivery drivers)?
There's an opportunity here to attract talent and investment as a safe haven. We just need a pro-business and creative leadership.
You have valid points. But dont you think that there are many obstacles in your way too?
1) Is NZ the only place that can work remotely? I think India has proved for years that they can remotely, have a very cheap workforce, bends every other way to accommodate large overseas corporations, etc. and that is why it is the place to go to as opposed to lets say Sweden or NZ?
2) Do you think that NZ is the only place that wants to attract the "best people in the world" and none of its unskilled? if you are an inspiring IT person will you prefer to work in Silicone Valley or in Wellington?
3) NZ is a democratic country, as such it can never be pro-business the same way lets say Singapore can be. NZ has the third highest minimum wage (and everyone says that it is too low and the living wage must be the minimum wage) in the world, a position not justified by any of its economic metrics.
No one is against NZ being more successful in IT, film industry, clean energy, robotic science etc. But pretty much all other countries, including those ran by criminally corrupt lunatics like Iran, have similar aspirations.
1) India was "cheap", at least on paper. Those with experience outsourcing there know that it's usually a disaster. Speaking from experience (software development), churn is rapid and damaging.
2) Have you looked at the cost of living in Silicon Valley? It's also close to saturation. Big tech is scouring the world for talent.
3) Yes it can. See Ireland.
My comment is simply that NZ is well positioned. Yes it is a highly competitive industry and attracting talent is difficult, but NZ has a lot going for it.
Outsourcing service providers are not the only IT exporters; there is ample local presence of international tech companies in the country. Every Silicon Valley tech giant still maintains its direct presence in India. Walk into the Mountain View campus of Google and you'll meet thousands of gifted minds who were discovered in their Indian offices and transferred over.
What makes NZ well-positioned? If a tech company were looking to relocate to a smaller country, wouldn't they be better-off in Sweden or Finland with their better connectivity and richer talent pool.
Yes, been there many times.
You start a project. Everyone is keen, even the Indian counterparts who will be doing lots of the work. Day one everyone is establishing roles and responsibilities and work outlines are decided. Day two everyone is confidently onto their work (or so they say). You check in one week to make sure everyone is working and see if there are any road blocks or problems. They all report no problems and show you tid bits of work being done plus re-affirm time lines... this continues for a couple of weeks. Week 4 you hear the team is being re-orgnaised, of the 5 people who were working on it before, only 3 will be able to now, plus a couple of new staff... OK... is everyone up to speed? Yes yes, no problem... by week 7 you start to get concerned as you approach a deadline... you check team work in their source control folders and... there is no work. Huh? You call a meeting and only 1 of the original people show up... oh you didn't know? The other 4 are working on priority fixes for another customer. OK, at least you have one that can show you the work done up until now which must be stored elsewhere... "work done?... no we were waiting for approval from our boss who has been in Mumbai and can't be contacted..." the excuses roll in.
I swear most of the time they spend making up excuses and pretending to work. It's all just lies and overly complicated word salads with most Indian outsourcing. Out of about 10 projects I have seen with Indian outsourcing, maybe 2 are successful, even those came with a LOT of rework and "phase II" changes. Have only seen it work reasonably well with a bank, but even then it's like pulling teeth. Probably nowhere near as cheap as doing it locally if you look at TCO.
India's problem has been the weakness of and corruption in its educational sector. Only elite universities really produce high-quality candidates for outsourcing, and many of these have then left the country. This is seen in the cost of rework and insourcing after companies attempt skilled outsourcing to India.
It does highlight the importance of our education sector for our own children, not just as an export industry for attracting foreign students for a quick buck. It's a key component of competitive advantage as a national economy.
After 45 years of IT I can answer that question. Kiwis are known in the English speaking world as good programmers and unlike other nationalities fairly sane and progmatic. NZ has the big advanage of low wages compared to other developed countries; their programmers are willing to travel to meet customers and their customer's users. And the time difference is a big advantage. So everything stacks up well except cost of housing and maybe variety of job opportnity. The good Kiwi programmers are met in other countries. Put our house prices where say Atlanta or Dallas are and with our lifestyle, low crime, good education we would do well.
Incidentally I was a POM and the best IT professional I've met in NZ was an immigrant from Kerula India.
Don't confuse productivity and expansion. Primary industries are nowhere near "saturation" with productivity, else we would not need an army of fruit pickers to descend on our shores every year for fruit harvesting - a perfect example of where productivity gains could be made.
The regions aren't immune - biking through Central Otago high country last year I had a number of chats to farmers. A couple were starting to use drones to get their stock in instead of having to spend a couple of hours on a motobike with dogs. They were lamenting... "now if only we could automate the drones to do it instead of having to monitor them..."
Not to mention Scott Technology's automated milkers...
Primary industries are ripe for huge productivity boosts, which need to have smart people designing systems for them. And don't even get me started on Construction industry, there is so much room for productivity improvements there, it's not funny. And before you ask, YES a lot of those people working in the industry could absolutely re-skill themselves to be operators/watchers/problem fixers in quite a short amount of time.
Public service could very well do with a trim down in many areas, but having worked in the public services multiple times, it's not all public service organisations, some are run very well and do a lot with not many people. IMO many of them should be run like a start-up company, do away with much of the beuracracy and operate on lean budgets and tight time frames. The monoliths of public service would hate it, but be much better for it.
"...equivalent of each person in the country spending about $520 less in April than they did in March,"
Sounds about right. I didn't fill up petrol AT ALL in April and it would usually cost me a couple of hundred dollars a month having to drive through Auckland rush hour traffic on weekdays and driving the family around on weekends. Sure, the weekly grocery bill during lockdown went up but it still ended up cheaper as we didn't get any takeaways.
... both and more than that, people fear loss of income. I noticed that Hyundai are offering a six month interest and payment holiday to customers who lose their job. Credit to Hyundai, that's an agile business. They know the middle class are worried. Over burdened with mortgage debt and now with loss of income hanging over them.
The government support appears to be mainly targeting the working (..and non-working) class. Without support for the middle class, the engine room of the economy, we're in trouble. The private sector is starting to fill that gap.
We have become a nation of wimps complaining about everything. My Grandparents, my parents, and to a large degree me, went though much worse.
Read this and reflect:
"It’s a mess out there now. Hard to discern between what’s a real threat and what is just simple panic and hysteria. For a small amount of perspective at this moment, imagine you were born in 1900.
On your 14th birthday, World War I starts, and ends on your 18th birthday. 22 million people perish in that war.
Later in the year, a Spanish Flu epidemic hits the planet and runs until your 20th birthday. 50 million people die from it in those two years. Yes, 50 million.
On your 29th birthday, the Great Depression begins. Unemployment hits 25%, the World GDP drops 27%. That runs until you are 33. The country nearly collapses along with the world economy.
When you turn 39, World War II starts. You aren’t even over the hill yet. And don’t try to catch your breath. On your 41st birthday, the United States is fully pulled into WWII. Between your 39th and 45th birthday, 75 million people perish in the war.
At 50, the Korean War starts. 5 million perish.
At 55 the Vietnam War begins and doesn’t end for 20 years. 4 million people perish in that conflict.
On your 62nd birthday you have the Cuban Missile Crisis, a tipping point in the Cold War.
Life on our planet, as we know it, should have ended. Great leaders prevented that from happening.
When you turn 75, the Vietnam War finally ends.
Think of everyone on the planet born in 1900. How do you survive all of that?
When you were a kid in 1985 and didn’t think your 85 year old grandparent understood how hard school was. And how mean that kid in your class was. Yet they survived through everything listed above.
Perspective is an amazing art. Refined as time goes on, and enlightening like you wouldn’t believe.
Let’s try and keep things in perspective.
Let’s be smart, help each other out, and we will get through all of this".
With all due respect, some of us are fed up of being told by our elders how much harder they had it, with scant consideration how they had it much easier in many other ways they never seem to want to discuss, and usually as a vehicle for telling us we are 'lazy' 'entitled' or in this case, 'wimps'.
But fair point, it is not the most constructive of responses so I have removed it.
Interestingly , in our personal case we reduced spending by way more than the $520 mentioned .
We saved that in Diesel and short -term vehicle insurance alone .
Another $300 not spent on entertainment and dinners and lunches and zero on spas, haircuts and that sort of stuff
Spent zero on clothing , footwear or DIY -type of stuff , zero at the Garden centre , local butchery or dairy .
Its made me realize we actually need a lot less than what we thought to enjoy life , we have been walking daily and have had lots of fresh air
They have to be right - every time.
Because if they get it wrong, just once; if that next fall turns out to be sustained and they didn't see it, then all the 'Just wait it out; it'll be back to 'normal' in a couple of months, Just you wait and see!" is going to be no consolation for insolvency.
As we all know. The biggest fall in the 1920's Crash, wasn't the first one.
The worst that happens to anyone who isn't invested now is - loss of opportunity; not bankruptcy.
Lockdown has been a welcome refresh for our household as well.
The forced austerity has cut our credit card bill from around $3,000/month to $1,000/month with most of those savings coming from money we are not spending at restaurants and on travel.
Handy timing since we ended up buying our first house during lockdown as well, having a lot more disposable income certainly makes the mortgage a lot less scary.
Not missing our old habits either, the simple life has its charms!
Other young couples we know are also looking to buy houses now, a number of our friends had large trips to Europe planned for this year and have got substantial refunds and travel insurance payouts and have decided they may as well get on the property ladder now that travelling is not an option for the foreseeable future.
And similar situations will be playing out in most civilised nations around the globe. I've been around (working) since the early 70's but nothing has come with such speed & devastation as covid. Sure the media hyped it & yes, the govts bought it & yet, we are the lucky one's when you look around you. Just based on the unemployed numbers in USA alone this is going to be a biggie. Confidence is low as you can see in the article. I'm trying to see it improving this month but I'm not sure that the full reality has hit home yet. Funnily enough our business is minus 50% YTD as well so that's reassuring in a very un-reassuring way.
Yeah but in the US their stimulation package makes it pay to be unemployed for now https://edition.cnn.com/2020/03/25/politics/senate-stimulus-unemploymen… . If I were self employed there I'd fire myself immediately. So it may not be the best comparison...
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