The resilience being seen in card spending by Kiwis evaporated last month, with total card spend dropping by a seasonally adjusted 1.9%.
That followed a gain in the previous month that had appeared to go against the expectations of a looming slowdown.
But the May figures paint a much more convincing picture of a slowdown emerging.
Stats NZ said the total value of electronic card spending, including the two non-retail categories, decreased by $174 million (1.9%) on a seasonally-adjusted basis in May 2023.
Total retail spending fell 1.7%.
The non-retail (excluding services) category decreased by $51 million (2.4%) from April 2023. 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 $1.4 million (0.4%). This category includes repair and maintenance, and personal care, funeral, and other personal services.
"This is the first time since December 2022 that only one industry saw a rise in spending, and the first time since February this year that total card spending fell," Stats NZ's business performance manager Ricky Ho said.
Westpac senior economist Satish Ranchhod said retail spending "was much weaker than expected in May". Westpac economists had expected a small rise.
"Weakness in retail spending has been widespread," Ranchhod said.
"There were sizeable falls in spending on household durables (like furnishings) and hospitality. That was despite a fall in fuel prices over the month."
Ranchhod said the softness in spending is particularly surprising given the lift in population growth in recent months as migration inflows have surged.
"Today’s weak spending result highlights the growing pressure on households’ finances," he said.
"Retail prices are continuing to rise at a rapid pace. We’re also seeing increasing numbers of households rolling on to higher mortgage rates. We expect those factors will be an increasing drag on household spending over the months ahead.
"Today’s result reinforces our expectations for a downturn in domestic economic conditions over the coming months."
ASB senior economist Kim Mundy said households are now feeling the pinch "and we don’t expect this to change any time soon". She said that consumer spending is "likely to remain soggy over the second half of 2023".
"Living costs are still rising (including steep increases in debt servicing costs for mortgage holders). At the same time, households have run down savings which has weakened household confidence and the willingness to spend," Mundy said.
"However, strong net migration will help to put a floor under consumer spending. The housing market could also provide some support to consumer spending. Thanks to strong population growth we expect house prices will soon turn higher again."
Mundy said, however, that whether or not strong population growth stems falls in aggregate spending, per-capita spending will remain weak over 2023.
"Nevertheless, we expect the RBNZ will be relieved to see the consumer demand balloon deflating. And falling consumer spending is consistent with our view that the current 5.5% OCR [Official Cash Rate] is likely to be the peak. But inflation is still high and, as discussed above, the risks are not all to the downside. As a result, it’s far too premature to be thinking about OCR cuts."
In actual terms, retail card spending was $6.4 billion, up 3.3% ($203 million) from May 2022.
Annual inflation, of course, was running at 6.7% as of the March quarter.
Stats NZ says values are only available at the national level and are not adjusted for price changes.
Electronic card transactions data covers the use of credit and debit cards in shops and online, and includes both the retail and services industries.
Total retail card spending fell $113 million (1.7%) in May 2023 compared with April 2023, when adjusted for seasonal effects.
The 'core' retail spending, which excludes fuel, fell 1.2%.
Seasonally adjusted card spending fell across all retail industries (including consumables, durables, apparel, fuel, and motor vehicles), as well as the non-retail excluding services category. Services was the only industry that saw an increase, rising $1.4 million (0.4%) compared with April 2023.
The largest contributor to the fall in retail card spending was fuel, down $25 million (4.5%), followed by apparel, down $13 million (3.7%).
These are the main highlights in terms of movement provided by Stats NZ:
- motor vehicles (excluding fuel), down $0.2 million (0.1%)
- consumables, down $6.8 million (0.3%)
- apparel, down $13 million (3.7%)
- durables, down $13 million (0.8%)
- fuel, down $25 million (4.5%).
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