As sugar rushes go, this one lasted a fair while - but all things come to an end.
And according to Kiwibank customer transaction data, consumer spending slumped about 9% in the March quarter.
Kiwibank economist Mary Jo Vergara says the fall in spending as tracked by the bank is the first time since the lockdown last year ended. Some people may have seen "the bottom of their lockdown savings".
"The resilience of household spending has surprised us, and has been a key driver of the Kiwi economy’s post-lockdown recovery," she says.
"The splurge in spending over the second half of last year lasted much longer than expected. But now we have seen a pullback. Kiwibank’s transactional data suggests that the 2020 spending sugar rush might be coming to an end.
"Domestic spend declined 9% in the March quarter, the first time since the first lockdown ended. The buffer of household savings built up over the initial lockdown may be eroding. And digging through the details, most high-level spend categories were on a downtrend. Annually, spending is still up 41.8%, albeit likely inflated due to a structural shift away from cash as a means of purchase."
Last year, Vergara says demand was especially strong for household contents and furnishings.
"But there appears to be a limit to the number of pools we can fit in the backyard, or how many times we need to repaint the house.
"After a year of renos and repairs, there’s nothing left on the to-do list. Demand for household-related spend fell 21% in the March quarter."
Instead, she says, overseas travel, to Australia at least, is now back on the cards.
"The decline in spend may suggest that some have begun filling up the jar once again, ready for when our door is creaked open."
She notes that "drawbridges" on either side of the Tasman have been firmly upright for over a year.
"Naturally, there’s a lot of pent-up demand for overseas travel waiting to be released. Like Kiwi, many Aussies will relish an opportunity for a break across the ditch, to visit friends and family not seen since before Covid."
She says while the April 19 start of the trans-Tasman travel bubble comes too late for the tourist summer season, it would provide some of our key tourist hotspots such as Queenstown, with hope as we head towards the ski season.
"And by country Australia is our largest tourist market by volume and total spend. In 2019, Aussies made up 40% of international visitors, with spend of $2.7 billion."
She expects some Kiwis will leave when the bubble is formed, especially if it is expanded to include the Pacific Islands.
"But for the Kiwi economy, the travel bubble will be a net benefit."
36 Comments
I think it may all end with some sort of negative supply shock.
Remember that a 3.5% growth rate will require about as much energy and resources over the next 20 years as what has been used from the onset of the industrial revolution.
Our high priests of economics believing in "forever growth" will keep on printing, but the nasty physical reality of the situation will ensure it doesn't.
Tweak the F.I.RE economy, favouring the vested interest? - look what will happens next...when every resources .. drain into... that black hole.
Every sane mind teachers, healthcare professionals, engineers, police, dentist, pharmacist etc. etc - all bought one way ticket to OZ, avoiding the land of long dark dump.
Gap appears when goosing finished.
Same with all QE and int rate cut induced increases in spending.
Now for the hangover.
This part of cycle seems to follow 9 months after roughly, the boost induction.
China notably slowing too.
So USA will do its damnedest to follow pattern, so their drop off we can expect next January approx.
Japan also looking peeky and EU so short on vaccination boost that it will not recover tl mid 2022 at earliest
So, what will we all do when the inflation arrives? ignore it to eroded debt
Every credit fuelled 'boom' is followed by an epic bust. Debt sucks future income into the 'now' where it is spent - on houses or cars or holidays or whatever. The future income is therefore already committed to repaying the debt and the interest. This is how a tsunami of credit makes a wasteland of the future.
Is the piper finally going to be paid?
Loans are again being repaid. Specuvestor's now have to increasingly pay some tax over the next three years. Interest rates guidance is trending up overseas. DTi and interest only being reviewed by the RBNZ, and one notes that Orr has previously requested DTi as a tool. The usual suspects are all complaining.
What could go wrong....popcorn.
Can't see Orr / Robertson deepening what looks very much like a double dip recession with more measures that are going to put brakes on the economy. They have enough political capital from being the party that engaged with the housing crisis and acted (the jury is out on if it was enough) to sit on their hands while all of these influences on our economy crash into each other and precipitates out in an overall effect.
They have looked at them and don't have any reason to believe they are fraudulent. They believe people have simply been picking up COVID in transit, particularly as they travel through India on connecting flights before getting on their flight to NZ. India is in the midst of a huge surge in cases just now.
Everyone needs to watch The Truman Show if they haven't seen it. The RBNZ has bern busy queueing up consumer spending with the wealth effect. No point having the houses with exorbitant price tags if everyone's buying instant noodles. Time to splash on some new artwork, furniture, artisan foodstuffs, ski holiday. Put it on the tab.
that pretty sums up NZ today....
go and have a look at the directors of NZME on the companies office website and ask yourself why it has three current or ex-bank board members...
have a look at the shareholdings....citicorp, jp morgan, hsbc...nominees so no one really knows who controls what...just lots of coincidences
MBIE were looking into nominee shareholdings and the trouble they could cause....what happened to this report?...shredded before the light of day I guess.
aren't we just being swindled as a country right in front of our eyes....the biggest con ever
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