Consumer spending with EFTPOS and credit cards rose by a seasonally adjusted 1.7% in April from March, Statistics New Zealand said today.
The rise was led by a higher spending on food and eating out categories, suggesting an improvement in discretionary spending as households became more optimistic, ASB economist Christina Leung said.
"This is in contrast to the increase in card spending in March, which had been driven by higher spending on big-ticket household items. While no regional split is provided by the data, the March result had suggested the strength in spending back then was merely a result of households in Christchurch replacing damaged household items, particularly appliances," Leung said.
Meanwhile, JP Morgan economist Helen Kevans said card spending unexpectedly spiked higher in April but that the outlook for the retail sector remained clouded by softness in the Labour market.
"The 1Q [March quarter] household labour force survey showed some improvement in labour market conditions, but wage growth slowed over the quarter. This suggests to us that households will remain inclined to pay down debt and, with debt levels still near historic highs (at close to 150% of disposable incomes) households will continue to struggle managing their credit obligations," Kevans said.
"Households will, therefore, aim to strengthen their balance sheets via slowing the rate of debt accumulation - at least until wage growth accelerates – which will curb consumer spending in the very near-term," she said.
Drivers changing habits?
Core retail spending, which does not include vehicle related expenditure such as that on fuel, rose 1.6% over the month, after a rise of 1.2% in March, Stats NZ said.
"There were rises in all core retail industries in April 2011, led by consumables (up 2.3%) and hospitality (up 2.4%). The consumables industry includes food, liquor, and chemist retailing; and the hospitality industry includes accommodation, bars, cafes, and restaurants," Stats NZ said.
"When the two vehicle related-industries are included, the value of transactions in retail increased 1.5%. Fuel retailing recorded its smallest monthly rise since August 2010, up just 1.0%, Stats NZ said.
The 1% increase in fuel spending was below the 3% increase in petrol prices over the month, suggesting many households had changed driving habits, Leung said.
Households less cautious?
"The broad-based improvement in retail spending in April is encouraging, and suggests households are becoming less cautious in regards to discretionary spending," Leung said.
"Recent developments, including improving employment demand and housing market activity, have seen a reduction in the headwinds facing the household sector. The latest drop in fuel prices will also be a welcome development," she said.
"Nonetheless, the recovery in retail spending looks to be a gradual one and there continues to be no urgency for the RBNZ to lift the OCR. Given the RBNZ would want to be sure the recovery is firmly underway before lifting the OCR we continue to see March as the most likely timing for the move."
Trend on the rise
Meanwhile, trends for the value of transactions in the total and retail series had been increasing since January 2009, and the rate of increase had picked up since July 2010, Stats NZ said. The core retail trend had generally been increasing since the series began in October 2002, and the rate of increase had also picked up in recent months.
The figures included data from the Canterbury region, Stats NZ said.
(Updates with JP Morgan comments on household debt, ASB comment)
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