Total retail sales fell by a seasonally-adjusted 2.0% in December when compared with the prior month, according to Stats NZ.
Stats NZ said that 'core' retail spending, which excludes fuel and vehicles also fell 2.0%.
All card spending - including non-retail industries was down a seasonally adjusted 0.6% in the month.
Some notable falls in retail spending were sales of durables (down 2.0%) and apparel (down 2.9%).
Stats NZ said in actual terms, cardholders made 182 million transactions across all industries in December 2023, with an average value of $58 per transaction. The total amount spent using electronic cards was $10.6 billion.
Westpac senior economist Satish Ranchhod says retail spending was weak in December, "capping off what was a tough year for many retailers".
"Today’s data reinforces the picture of flagging momentum in New Zealand’s household sector. Key to watch going forward will be the strength of the labour market. While economic growth has slowed, unemployment has remained low, and that is likely to have supported spending appetites. However, with economic conditions cooling, unemployment is set to push higher over 2024 and wage growth is set to slow. That means the risks for spending over the new year are to the downside," he said.
Ranchhod said while the decline in retail spending was sharper than the 0.2% drop the Westpac economists had expected "in part that softness is likely to reflect the growing prevalence of sales events like ‘Black Friday’ in the New Zealand marketplace".
"Those events have seen many households shifting their spending to November (where card spending was up 1.6% in seasonally adjusted terms), and as a result spending in December now tends to be a bit softer."
ASB senior economist Kim Mundy also noted that the December fall "follows a robust November print and suggests some consumers may have done their Xmas shopping early last year".
"However, it’s very clear that the consumer demand backdrop remains weak and that the RBNZ’s monetary policy tightening is having the desired impact." Mundy says households’ budgets have been significantly impacted by rising debt servicing costs and broad cost of living pressures.
"A lift in the unemployment rate in late 2023 will have done little to help consumers’ willingness to spend.
"Strong population growth remains the key support to retail spending but has so far been unable to offset the impact of significantly trimmed household budgets.
"We don’t expect these challenges to subside for some time either. Substantial mortgage relief appears to be some way off and a further weakening in the labour market is likely to be an additional headwind to the retail sector over 2024.," Mundy says
Ranchhod says taking a look at the longer-term trend in spending, the extent of the softness in spending appetites is apparent.
"Over the past year, spending levels have effectively been tracking sideways. In fact, compared to the same time in 2022, spending in December 2023 was down 0.6%. That’s despite a population growth of around 2% and price rises of close to 5%. Putting that together signals that many New Zealand households are keeping their credit cards in their pocket," Ranchhod says.
"As we’ve highlighted before, the main factor weighing on spending appetites has been the mounting pressure on households’ finances. Consumer prices have risen strongly over the past year. There’s also been related increases in borrowing costs. Those increases have been sucking a lot of cash out of households’ wallets, constraining discretionary spending.
"Looking across spending categories, the past year has seen increased in spending on groceries, consistent with the rapid growth in the population. However, spending on durables, like home furnishings, has fallen sharply over the past year, dropping by 4%.
"Hospitality spending has been growing, but only modestly. While international tourist numbers are continuing to push higher, New Zealanders remain cautious about their spending on activities like dining out," Ranchhod says.
20 Comments
Really good point. I still can't believe the RBNZ kept the Funding for Lending Programme in place (inflationary) whilst increasing the OCR (deflationary). Defies logic. So they have already shown they will put their reputation ahead of doing what's right for NZ Inc.
I can't believe they didn't start ticking up the OCR when they cracked open that pool of money for the FLP, and then flooded more cash with the LSAP. A high school 7th former doing a basic economics could have told them increasing the money supply will be inflationary, and to lower the guaranteed increase in inflation that would come, it would be most prudent to start the uptick at the same time. Sadly they gave themselves a pat on the back while the economy was juiced on stimulants (debt) and waited too long.
The fools quoted in this article are so far behind the data it's ridiculous. You don't need to wait for lagging quarterly employment data - look at exploding benefits claims, job advert collapses in depressed areas of the country, spending changes in real terms (cost adjusted), discretionary elements of spending etc etc. By the time RBNZ and our commentariat catch-up, we will be so far gone.
It's looking worse and worse in the middle east but the big players are (so far) abiding by a careful escalation management protocol. US and UK hit Yemen with 150+ guided missiles and bombs - but Houthis only report five soldiers killed. Iran launches 24 big guided missiles (travelling approx 1230km) at targets in Syria and Iraq landing right next to (but not on) US bases - US reports no US facilities or personnel were hit. Hopefully cooler heads will prevail and no one does something silly that would force another party to really escalate for real.
Without knowing how much is spent in total in Nov vs Dec the % is meaningless. I haven't looked. But I suspect Dec is much larger.
One notes that a bank economist also makes this conclusion ... but without the total amounts such statements are misleading.
ASB senior economist Kim Mundy also noted that the December fall "follows a robust November print and suggests some consumers may have done their Xmas shopping early last year".
I find that September through April the prices are discounted off an inflated Christmas price structure, but they drop that over the cold months. I find whiteware and computers cheapest in late July and August on average. Of course depends what you're looking to buy
If it's any consolation, h'hold spending was dismal in Dec in Aussie as well.
Key takeaway:
This 0.3% decline in per capita GDP in the year to September has been driven by a sharp 1.9% fall in per capita household consumption
https://www.macrobusiness.com.au/2024/01/plunging-household-spending-so…
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