Electronic card spending falls 1.2% in Dec from Nov; All industries hit except fuel, Stats NZ says

The total value of electronic card transactions fell 1.2% in December from November, seasonally adjusted figures released by Statistics New Zealand show.

This follows at least 1% increases in each of the previous three months, and indicates thrifty consumer spending in a month dominated by pre-Christmas sales. ASB economist Christina Leung said the figures pointed toward the Reserve Bank of New Zealand remaining cautious over the next few months, with the Official Cash Rate likely to remain on hold at 3% for the first half of 2011.

All industries experienced falls in the value of card spending except the fuel retailing industry, which increased 3.3%, Stats NZ said. The value of transactions in the broader retail industries fell 0.9% over the month.

The value of transactions in core-retailing, which excludes vehicle-related industries, fell 1.6% in December from November, Stats NZ said. The fall was led by the durables and consumables industries.

Durables card spending (including furniture, hardware and appliance retailing) fell 1.2% over the month, while consumables (including food and liquor retailing) fell 0.6%, Stats NZ said.

“Trends for the value of transactions in the total and retail series have continued to increase since early 2009. The trend for the core retail series has generally been increasing since the series began in October 2002 but has eased in recent months,” Stats NZ said.

Unadjusted figures show the total value of electronic card spending rose 4.1% in December 2010 from December 2009, Stats NZ said. The figures include GST, which rose from 12.5% to 15% on October 1, 2010.

The rise in GST increased general prices by around 2.2%.

'Spending was brought forward'

The broad-based declines in December spending suggested the substantial increase in retail spending in the September month had indeed been the result of households bringing forward the purchase of major items ahead of the GST increase in October, ASB's Leung said.

"Fuel was the only category to record an increase in sales values, reflecting the 4.5% increase in petrol prices that had occured over the December month. The continued increase in petrol prices in recent months is likely restraining households' discretionary spending." Leung said.

"Going forward, we expect a continued recovery in the labour market will support an improvement in consumer confidence. This should underpin a gradual recovery in retail spending over the coming year," she said.

Debit cards dominate

There were 111 million electronic card transactions in December 2010, up 4.6% from December 2009, Stats NZ said.

As a proportion of total transactions, 56% were made with debit cards in December 2010, up from 54.9% the year before. Correspondingly, 44% of transactions were with credit cards, from 45.1% in December 2009.

The mean transaction value was NZ$56 in December, the same as a year earlier.

Here is the reaction to the figures from Labour Party finance spokesman David Cunliffe:

The reduced value of electronic card transactions in December was bad news for retailers, but shows Kiwis are justifiably nervous of faltering economic prospects under National, says Labour’s Finance spokesperson David Cunliffe.

“The 1.2 percent decrease in the total value of electronic card transactions in December was across all retail industries except fuel,” David Cunliffe said.

“The value of fuel transactions was presumably driven by the increased cost of petrol, but overall the picture is one of a lack of public confidence in the way New Zealand's economy is heading.

“The recovery is mired, the Government has done nothing to help, and Kiwis are worse off now than the day National was elected,” David Cunliffe said.

“Last month’s very serious Reserve Bank projections showed growth projections for mid-2011 cut by a full percent (compared to just three months ago), unemployment staying above 6 percent until after the next election, and fiscal deficits skyrocketing.

“No wonder Kiwis, even the ones who have jobs, are worried about spending,” David Cunliffe said.

“Bill English and John Key have utterly failed the test of economic management. Their unaffordable tax cuts for the rich, higher GST, government charges and higher inflation for everyone, as well as the abject lack of a plan for growth and jobs, has seen New Zealand slip backward, not move forward.”

(Updates with Cunliffe comment economist comment, chart)