Statistics New Zealand says retail spending - excluding fuel - dropped by 0.3% in June

Core retail spending - which excludes fuel - dropped on a seasonally-adjusted basis by 0.3% in June.

The figures add to the evidence that the rising cost of living is starting to prompt people to cut back.

Westpac senior economist Satish Ranchhod said retail spending as measured by electronic card transcations "effectively stalled" in June "in the face of continued price rises and growing pressure on household budgets".

Annual inflation hit 6.9% as of the March quarter.

Ranchhod said, importantly, that small easing in spending in ex-fuel categories comes against a backdrop of strong price increases for all manner of goods and services.

"That’s constraining the volume of goods that households can purchase. In other words, while our nominal spending levels may be holding broadly steady, the amount of retail goods we’re actually buying is going backwards."

Looking to the second half of the year, Ranchhod expected that pressure on household budgets to "become even more pronounced".

"Consumer prices are continuing to climb. In addition, many households will see the costs of servicing their mortgages pushing higher over the next few months."

The Reserve Bank (RBNZ) has another review of the Official Cash Rate on Wednesday (July 13) and is pretty much universally expected to raise the OCR to 2.5% from the current 2.0%.

"The RBNZ is trying to slow demand in order to contain the current rampant inflation pressures," Ranchhod said.

"While today’s [spending] report does signal that demand is starting to ease off, the economy is still running well above trend. The RBNZ will still want to see a more meaningful slowdown."

In terms of the detail in the latest release, Statistics New Zealand said that including fuel the amount of electronic card transactions rose by 0.1% in June.

Stats NZ said by spending category, the movements were: 

• fuel, up $18 million (2.9%)
• apparel, down $0.4 million (0.1%)
• consumables, down $6.5 million (0.3%)
• durables, down $10 million (0.6%)
• motor vehicles (excluding fuel), down $3.3 million (1.6%).

Stats NZ said in actual terms, cardholders made 148 million transactions across all industries in June 2022, with an average value of $56 per transaction. The total amount spent using electronic cards was $8.2 billion. 

Due to the effect of Covid-19 on tourism, Stats NZ said it was unable to release seasonally adjusted figures for the hospitality industry.

"As such, we are focusing on the actual hospitality values for the June 2022 publication. We will continue to monitor this approach as more data becomes available.

"Spending in the hospitality industry fell $6.0 million (0.6%) between June 2021 and June 2022."