Many New Zealand retailers had a "soft" end to 2024, Westpac senior economist Satish Ranchhod says.
In a 'Retail Spending Pulse' bulletin, Ranchhod says spending on Westpac issued credit and debit cards was up just 2% in December compared to the previous year.
"While it’s encouraging that spending is rising, that’s still a very muted gain, especially given the large increases in operating costs that many retailers have faced over the past year. In addition, with New Zealand’s population increasing by about 1% last year, it also points to very limited growth in per-capita spending levels," he said.
Ranchhod said he thought 2025 will be "a better year for households and retailers", with some of the "big financial headwinds" now easing off.
"Inflation has dropped back and is now sitting close to 2%. And that better contained inflation outlook has allowed the RBNZ [Reserve Bank] to cut the Official Cash Rate [OCR] in recent months. We’re picking another 50bp cut at the upcoming February meeting, with further cuts likely over the year ahead."
But in terms of what happened at the end of last year, Ranchhod said it was "a very mixed picture" across sectors. Spending on groceries climbed about 3%. And there was more spending more on furnishings and appliances (+5%) and travel (+2%).
"However, we’re continuing to see lean times in the hospitality sector, with reduced spending on entertainment activities and dining out."
Spending's also been mixed across the country.
Ranchhod said areas with "strong agricultural backbones", like Southland, Otago, Northland and Waikato, have seen larger lifts in spending, potentially reflecting the improvement in agricultural export prices.
In contrast, spending growth has been more modest in Auckland (up 1% over the past year).
"Auckland has borne the brunt of the recent downturn in population growth, and that’s likely to have restrained spending. And in Wellington, spending growth has essentially stalled over the past year in the face of public sector cutbacks and low consumer confidence."
It will take time for the easing in financial pressures now being seen to ripple through the economy, Ranchhod said.
"But over the course of this year, we expect to see a firming in both household spending and the housing market. We’ve already seen consumer confidence pushing higher in recent months.
"However, we are still facing some challenges. Unemployment has picked up to 4.8% and is set to push above 5% over the coming months."
And Ranchhod noted that we’re also seeing an increasingly rocky global backdrop, with the NZ dollar falling sharply, earlier this week touching its lowest level since 2022.
"That’s welcome news for New Zealand exporters and tourism operators, who could see a bump in their earnings. However, for households the lower dollar is likely to push the price of some imports higher, including petrol. That will add to the pressure on households’ finances and will also be an important consideration for the RBNZ when they decide how far the OCR will be cut this year."
6 Comments
Frankly with the economic stress that people face they should be significantly reducing their credit card and indeed all spending. To be continuing with any spending increase is not wise for individuals under stress.
As for spending on entertainment and hospitality, this is just frippery and needs to be significantly knocked on the head and the workers migrated into real wealth and export dollar earning enterprises so that we can get closer to living within our export earnings.
Our economy seems to be based on
-Buying and selling each others house at ever increasing prices
-Immigration
-The hospitality service sector and retail
-Building infrastructure and services for the hordes of immigrants
-Social welfare
None of this adds anything that generates real wealth or export income. The poor old farmers and tourism sector underpin the bulk of our export earning enterprise and as we have seen in the last year what is left of our industrial sector is shrinking at an alarming rate.
Our economy needs a serious reset and re direction.
Yeah. A shame we had to stop stealing from other peoples. We need to find more of them to steal from, ay? /sarc
On a more serious note ... We now have the wonderful situation where our rich are quite happy to steal from everyone else by never paying the taxes on the wealth they accumulate.
yes we have to take responsibility for this ourselves. We sleep walked into it. I think that China played part in it also; but we let them do it.
For example I know somebody in the carpet industry. He said that the Chinese were buying our wool, shipping it, processing it into carpet then transporting it to markets at a lower price that we and the Chinese were paying for the raw wool. No matter how efficient and productive, you cannot compete in export markets in the face of that. I have noticed similar cases in Chinese made furniture sold in an Auckland shop. Tasmanian Oak beautifully made furniture at prices that would barely cover the price of the wood and shipping. More recently my wife was bothered by a Temu advert. 86 cents for a dress with free delivery. Just think about it, how much would it cost to deliver it from Auckland. NZ Post something close to $10. This was probably made from cotton imported and transported to China, Made and transported to a base in Auckland then couriered from there, all that for one tenth the cost of the internal NZ postage. What the hell is going on? Clearly there are enormous subsidies in China that are aimed at destroying competitive industries in other countries around the world. But we have to take responsibility for letting them do it to us.
I purchased some genuine Cat excavator parts directly from China at 8% of what they would cost from Terra Cat New Zealand. The Company in China even air freight them directly to me free of charge, I understand that the Chinese government covers the costs of freight...
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