August saw still not-good, but less-bad, retail sales, giving retailers some hope better times might be ahead after a really rough winter.
Data released by electronic payments company Worldline NZ shows consumer spending through core retail merchants (excluding hospitality) in its payments network reached $2.89 billion in August 2024.
And while this was down 0.5% compared with August 2023, it's an improvement on the annual decline of 2.6% seen in July.
Worldline NZ’s chief sales officer, Bruce Proffit, says although spending did increase weekly from the second week of August onwards, spending for the month overall remained below levels seen at the same time last year.
He did say though that the uptick in spending was the start of a rising spending pattern that usually runs into Christmas, "giving retailers hope that a pickup in annual spending growth is also imminent".
"There is a temptation to attribute the rising spending trend within the month to interest rate cuts and improving business confidence levels. While these factors are likely to feed through to increasing spending, the improved trend seen during August was largely due to the usual seasonal increase that occurs at this time of year," Proffit said.
Stats NZ's electronic card transactions data for August is due to be released next week. But the Stats NZ figures have for the past six consecutive months registered falls in spending.
Likewise the Stats NZ quarterly retail sales figures showed a 1.2% drop in activity during the June quarter, reaffirming how tough the environment has been. Recall, of course, that NZ's GDP has recorded falls in four of the last six quarters, and the results (yet to be released) for the June quarter are universally expected to show another decline.
Proffit says there is no doubt that it has been a tough winter for retailers, and the seasonal lift in spending that tends to occur around now and run into Christmas will be extra welcome this year.
Retail NZ's chief executive Carolyn Young said "it may be some months" before retailers have "turned the corner".
Recent economic indicators showed that inflation has come under control and interest rates are on the way down, but remain a factor, alongside profitability as retailers margins are squeezed, she said.
"In August we have seen tax breaks together with the cuts in the Official Cash Rate and a small improvements in consumer confidence, however these factors are yet to have a major impact on consumer spending as outlined in the Worldline data.
"We are hopeful that if businesses can survive the next few months then we may turn the corner in time for Christmas trading."
10 Comments
High net migration, housing inflation, cheap debt infusion, tourism, etc. - successive governments have tried to game growth through various stimuli instead of proper economic reforms. And here we are in 2023 with the food and fibre sector still holding the fort and keeping the entire economy from imploding.
The same can be said about iron ore across the ditch where a sixth consecutive quarter of negative per capita GDP growth was reported moments ago.
The farmers thought big. They took on cheap debt to buy more land and more cows. Then they imported Filipinos to milk them. When the farmer cashes out he buys a bach and a stack of rental properties. When the Filipinos manage to work themselves out of work permit bondage and get residence they move to the towns and cities to help with the housing inflation.
More spending by unproductive retirees who cash in their capital gains.
Less production as workers move overseas because they see no future here.
Less capital investment as productive effort is devoted towards meeting the discretionary consumption of said retirees.
Equals very inflation and perhaps some sort term growth, but not robust and sustainable economic growth.
You seem wedded to a simplistic viewpoint that higher demand translates directly to higher output with minimal impact on inflation. This is just not true. I've shown you graphs that clearly demonstrate that inflation in 2021-22 was triggered by surging demand - most likely more of that demand flowed into inflation than actual growth. You dubiously claim that this is coincidence and poor correlation across the long term series proved there was no reliable relationship, but the reason demand and inflation don't correlate well across a longer time period is due to the negative feedback loop of high inflation - - > high OCR - - > low demand. (Meanwhile you assume that relatively reliable correlation between import prices and consumer prices is proof of imported inflation - as though there couldn't possibly be any lack of competition and profiteering in our import markets.)
You're clearly very intelligent; why are you pushing such an extreme viewpoint? What's the agenda?
There is a lot to discuss there, but i'll focus on the initial post. Spending by 'non productive retirees' (or the next gen inheriting those gains) still creates and sustains jobs in the economy. That was my point - that aggregate demand in the economy is a function of house prices and mortgage lending. It sucks, fair enough, but that doesn't stop it being true.
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