The tentative recovery in retail spending stalled again last month, while separate data showed that the services sector, which makes up about two-thirds of GDP, remained in contractionary mode.
Westpac senior economist Satish Ranchhod said the March spending figures were "much weaker than expected".
"The momentum in spending that we saw last year looks to have stalled," he said.
After dipping in January, retail spending had risen again slightly in February - but that was well and truly washed away with a 0.8% seasonally adjusted decline in spending in March.
Statistics New Zealand says the 0.8% fall in electronic cards spending in March included the following key movements:
- durables, down $39 million (2.5%)
- hospitality, down $14 million (1.1%)
- fuel, down $12 million (2.3%)
- apparel, down $6.9 million (2.1%)
- motor vehicles (excluding fuel), up $4.0 million (2.1%)
- consumables, up $9.5 million (0.4%).
Core retail spending, which excludes petrol and vehicles, dropped 0.8% as well.
Ranchhod said the softness in spending was notable as fuel prices fell over the month, which should have helped to support spending in other areas.
"In our recent discussions with retailers around the country, we’ve continued to hear about sluggish sales, with cost-of-living pressures a continued drag on spending."
Comparing the actual figures for March with March 2024, core retail spending was down 0.7%, while total retail spending was 1.6% lower. And, remember, the figures are not inflation-adjusted.
Separately, the BNZ-Business NZ Performance of Services Index remained in contractionary mode, albeit mildly in March. The PSI for March was 49.1 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was up 0.1 points from February but still well below the average of 53.0 over the history of the survey.
Back on the electronic cards transactions, Stats NZ said the non-retail (excluding services) category decreased (seasonally adjusted) by $76 million (3.3%) from February 2025. 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 $1.0 million (0.3%). This category includes repair and maintenance, and personal care, funeral, and other personal services.
The total value of electronic card spending, including the two non-retail categories (services and other non-retail), decreased from February 2025, down $137 million (1.5%).
In actual terms, cardholders made 169 million transactions across all industries in March 2025, with an average value of $54 per transaction. The total amount spent using electronic cards was $9.2 billion.
The $54 per transaction figure was down from $55 spent per transaction in March 2024.
The further contraction in the PSI for March followed the earlier release (last week) of the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). This index showed expansion for the third consecutive month after contracting through most of 2023 and 2024.
BNZ senior economist Doug Steel said that combining together the PSI and the Performance of Manufacturing Index (PMI), the Composite Index (PCI) suggests "a modest economic recovery".
"The services sector is still contracting, albeit only just. Cost pressures are high, but firms are struggling to pass these on to consumers," Steel said.
"US trade policy announcements are changing the outlook for the global economy by the day. Forecasting the exact economic impact of US tariffs and subsequent country retaliation is fraught with difficulties. However, the risks to the global and NZ growth outlook are clearly downward. As things stood in March, NZ’s PSI trailed global equivalents. Looking across our key trading partners, NZ was the only country with a PSI still languishing below 50," Steel said.
Westpac's Ranchhod (commenting about the retail spending figures) said the "soft result" reinforces the Westpac economists' expectations that the broader recovery in the New Zealand economy "will remain gradual in the near term".
Nevertheless, they do continue to expect a pick-up in spending through the latter part of the year.
Ranchhod said over the next six months more than half of all mortgages will come up for refixing and many borrowers will roll on to lower rates, which will help to boost spending.
"But even with that boost from lower interest rates, there are still some powerful headwinds that could weigh on household spending. In addition to the large cost-of-living increases in recent years, the labour market remains soft. At the same time, the global backdrop remains very rocky, and that could dent confidence. It could also affect financial conditions in New Zealand, which would be important for spending appetites," he said.
7 Comments
Spend spend spend....people are choosing not to.
I think you'll find many don't have a choice...
"In our recent discussions with retailers around the country, we’ve continued to hear about sluggish sales, with cost-of-living pressures a continued drag on spending."
Yes. Which is why interest rates haven't finished falling yet.
Feel sorry for those who loose there job. On the other hand its not the most useful or productive arm of society.
hardly a surprise -- although rents may be static and mortgages dropping -- they are much higher than two years ago and most councils had 10% rates rises -- not to mention increased insurance costs -
With all the uncertainty I think people are simply a lot more careful with what they have and buying less Temu / Ali express junk these days -- and more focused on paying down debt - and wellbeing experiences
Temu / Ali express junk
Or, people are realising that NZ retail charges an arm and a leg for items that are mostly made in China anyway, and are happy to bypass the middleman by buying direct from Temu/Aliexpress. They save money, especially as they have the option to buy small things that allow the purchaser to fix their broken stuff for cheap, as opposed to throwaway NZ society that keeps updating models of items every few years for planned obsolescence, requiring full replacement. Same lifestyle, less cost or lower quality, many are making this choice as the NZ retail stats show.
"Or, people are realising that NZ retail charges an arm and a leg for items that are mostly made in China anyway,"
While that may be largely true there does appear some form of subsidy if purchased directly through these sites...You can source directly from China via manufacturer but for small volumes the freight and compliance costs usually dont make sense (not to mention internal freight costs) to avoid the local importer....retail however.
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