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Stats NZ says the seasonally adjusted spending fall in December was the first for nine months and was a 'large' fall for a December month; economists say consumers have taken on board Reserve Bank warnings about spending

Personal Finance / news
Stats NZ says the seasonally adjusted spending fall in December was the first for nine months and was a 'large' fall for a December month; economists say consumers have taken on board Reserve Bank warnings about spending
[updated]
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Source: 123rf.com. Copyright: kwankwann21

Retail card spending had quite a chunky drop last month on a seasonally-adjusted basis, which is perhaps a sign that the Reserve Bank's ramping up of interest rates is starting to have a dampening effect on consumers.

Westpac senior economist Satish Ranchhod said retail spending was softer than expected in December, "adding to signs that the domestic economy is turning down".

"It seems that New Zealand households are finally heeding the Reserve Bank Governor’s advice, with the latest retail update pointing to restraint in spending over the Christmas holiday period."

ASB senior economist Mark Smith said consumer spending "looks to have ended 2022 on a weak note and RBNZ warnings look to have been heeded".

"Moreover, our view remains that retail spending will struggle over 2023 given headwinds facing the sector."

Stats NZ business performance manager Ricky Ho said spending fell $166 million (2.5%) in December 2022 compared with November 2022, when adjusted for seasonal effects.

"The fall in retail card spending is large for a December month, and this month’s drop is the first in nine months," Ho said.

While December 2022 retail card spending rose in actual terms, the increase was smaller than those typically seen in past December months, he said.

Seasonal adjustment is the process of estimating and removing seasonal effects to allow comparison of data for adjacent months.

Stats NZ said spending fell across five of the six retail industries, with the largest fall being from sales of durables – down $95 million (5.7%). Durables includes items such as furniture, hardware, and appliances.

Spending on fuel and apparel (clothes and shoes) was down, $26 million (4.3%) and $17 million (4.7%) respectively.

The only spending category that saw an increase was groceries and liquor (consumables), up $39 million (1.5%).

Westpac's Ranchhod said the declines in spending were "particularly notable".

"For most of 2022, households were continuing to dial up their spending on discretionary items despite large price increases. Spending was also boosted by the return of international tourists to our shores.

"However, as we’ve been highlighting for some time, households’ finances are coming under increasing pressure on several big fronts. Continued rapid price increases are eroding their spending power. Falls in house prices have meant that many families have seen the value of their assets decline. And, perhaps most importantly, mortgage interest rates have increased sharply over the past year," he said.

ASB's Smith said weaker asset prices have hit household balance sheets and surging living costs are sapping household cashflows and eroding post-lockdown savings.

"The RBNZ has been explicit in noting that domestic spending will need to slow to get inflation down. If not, even higher interest rates will ensue. This warning looks to be hitting home, with weak household spending volumes a key contributor to the mild recession we expect for NZ in mid-2023 (if not earlier).

"Weakness in household spending could see the RBNZ potentially scale back the 125bp of [Official Cash Rate] hikes it has signalled for early 2023, but the inflation outlook should take priority and the RBNZ is unlikely to wobble unless it is 110% confident inflation will settle in the 1-3% inflation target range.

"OCR cuts are unlikely until the second half of 2024, but weakness in household spending activity and a cooling outlook for retail price inflation could see the timeframe for OCR cuts bought forward," Smith said.

The total value of electronic card spending, including the two non-retail categories (services and non-retail) fell $104 million (1.2%) in December 2022.

In actual terms, retail card spending was $8.1 billion, up 4.8% ($375 million) from December 2021.

“The largest contribution to retail card spending came from groceries and liquor which reached $3.1 billion in December 2022,” Ho said.

In terms of the December quarter, seasonally adjusted retail spending increased by $110 million (0.6%), following a 1.7% rise in the September 2022 quarter.

“Spending on groceries and liquor was the largest contributor to the rise in retail card spending in the December quarter,” Ho said.

Actual retail card spending was $22 billion in the December quarter, up 9.0% from the December 2021 quarter. Spending on hospitality had the largest increase, up $1.0 billion (37%) compared with the December 2021 quarter.

“As Covid restrictions eased over the last year, people were able to get out and about to cafes and bars, and to resume travelling,” Ho said.

Values are only available at the national level and are not adjusted for price changes.

Electronic card transaction data covers the use of credit or debit cards in shops or online and includes both the retail and services industries.

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57 Comments

Groceries up because prices are up.

Liquor up as we drown our sorrows.

Retail sales down, we raid instead.

I wonder how meth did?

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13

Tourist nights and tourist towns up. Along with intnl student numbers.

NZ economy is a V8 economy but mostly coughs along on a couple of cylinders at a time.

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8

Some of the lowest GDP per head in the developed world. Less than $60k per person… more like a 50cc single cylinder economy!! 
(FYI.. UK $75k + and USA 100k+) lowest productivity in the OECD.. justify that one !?? 

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That figure is irrelevant, you have missed the point completely. The economy has various legs (cylinders) to support it, even if one or more are out. That is why it keeps standing (running)

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HW2.. please explain how the figure is irrelevant? You can’t claim the economy is like a V8 when productivity is terrible. We have agri and tourism… what else? 

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I agree. Every attempt to move our economy on from those two sectors has been about catering to domestic consumers. This in turn has put more pressure on agri and tourism to pay the way for a burgeoning workforce employed in domestic-focused sectors.

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7

And those consumers typically are not only spending less they are too getting less for what money they can afford to spend.It’s a double negative and one wonders what the hell the powers that be thought would be achieved exactly by the borrow to spend to save the economy strategy that was promoted in the throes of the pandemic.

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8

Should we have let the pandemic run its course. Forget lockdowns, and mandates. Frontline health staff would have taken one for the team

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Who needs grandma or her nurse

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The irony of course is this getting less for what money we can afford to spend has been going on for at least two decades in the form of what we pay for our housing, and that has been trumpeted as a good thing.

House prices are still approx. 30% higher than their true free market cost due to all the non-value added costs that bad Govt. policy has caused.

This means for anyone with a mortgage, that mortgage is anywhere from 50% to 100% more than it needs to be, which is a debt that is locked in regardless of whether the price goes up, or down, and then on top is the extra interest you are paying regardless. And of course, the cost of ownership affects the cost of renting.

Would nurses etc. be needing to go on strike for higher wages if their housing costs weren't so high? 

New Zealanders would have so much more discretionary income for savings, health, education etc. if housing policy had not been corrupted by all political parties.

And the maths on how this had to end, as it is, is about as formulaic as you can get, except for those blinded by their own self-interest.

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10

Does selling houses to each other count?

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2

Claim that the economy is like a V8 and then back it up with…. Nothing! 

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4

Building on that analogy, the size of our economic engine is irrelevant when vested interests and successive governments are busy de-motorising our economy and replacing the powertrain with cheap labour to pedal ourselves along.

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9

NZ economy is a V8 economy but mostly coughs along on a couple of cylinders at a time.

Fuelled along by 98 Octane property speculation, although there seems to have been a bad batch of late and she's coughing and spluttering something fierce.

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1

People are shopping more during Black Friday sales in Nov rather than waiting for Boxing Day sales in Dec. 

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1

People are waking up that the sales are no longer clearing excess stock at low prices, rather they are stock purchased explicitly to sell at a "sale" price.

So are generally just watching and waiting for an actual sale, or buying from overseas.

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8

I wonder if people have woken up the the fact 50% off sales are based on prices that have been inflated by 30% from the day before the sale? "B......., you'll never buy better"♫ ♫ ♫

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2

retail card spending was $8.1 billion, up 4.8% ($375 million) from December 2021

This is worrisome considering there were Covid restrictions in place until early 2022 and there weren't any international tourists in NZ back in Dec 2021.

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Massive discretionary spending cuts coming up this year, even people that don't need to pull back are doing so. Reports out of the USA are looking pretty ugly with predictions that this will be the biggest crash of all time.

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For some fun I asked chatopenai to write a letter about this -

My dearest Adrian,

I hope this letter finds you well. I have been thinking about you a lot lately, especially when I went shopping for groceries and liquor. I couldn't help but notice the prices have been on the rise and it made me think of you. I know it's not fair to blame you for the Reserve Bank's decision to increase interest rates, but it's hard not to. I can't help but think that if you were here with me, we could have saved more money together.

I miss you and I can't wait for the day when we can shop together again without the burden of high prices.

Forever yours, Jacinta

P.S. I hope you're ready to buy me a lot of groceries and liquor as a way of apology.

 

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9

Behind the paywall but excellent article on the specifics of imminent global threats to the economy. Japanese bonds described as a "likely Black Swan Event" with a good explanation for those of us not too knowledgable about bonds.

 

https://www.nzherald.co.nz/business/interest-rate-rises-risk-a-financia…

 

 

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2

Evans-Pritchard. Would be a good read. Some of the commentators here have been alert to what's going on in Japan and the huge pivotal shift it could represent for capital flows. It should not be a Black Swan event if people are already discussing it. But I do know that the eyes of people glaze over when I discuss it offline. 

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LOTs of venture cap and PE have borrowed heavily and cheaply in Japan to fund international investment, some will unwind, and not gracefully.

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LOTs of venture cap and PE have borrowed heavily and cheaply in Japan to fund international investment, some will unwind, and not gracefully.

Makes sense. The Japanese themselves are not big on the VC game. I'm loosely connected to some Japanese starts ups in SEA through consulting work; for ex, one food service supply chain solution. Initially funded by a Japanese bank but now by one of the Thai corporate behemoths.  

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Even in cases like Suntory owning Frucor (totally legit and strategic), we have seen a lot of vertical integration fuelled by Japanese companies being able to borrow real cheap.   IMHO this is as big for JPY as QE was for the USD.

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Even in cases like Suntory owning Frucor (totally legit and strategic), we have seen a lot of vertical integration fuelled by Japanese companies being able to borrow real cheap.   IMHO this is as big for JPY as QE was for the USD.

Yes yes. BTW, done work for Suntory Pepsico JV. But I do wonder what kind of cash pile a company like Suntory is sitting on. Japanese companies are a whole different animal and their reliance on funding is completely different to what we might expect in the West.  

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Suntory , as far as I know is solid, but many will not be.  Also Frucor make dosh.

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Swerve the paywall, seems to have been removed from the Chrome store but download from here still works:

https://chrome-stats.com/d/cbjdgaghcellmhofepnabpilajljibma/download

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I seem to be living through an inordinate number of black swans and perfect storm events in my lifetime. They have long since overtaken what swans and imperfect storms. I hardly remember a time before the music was about to stop.

Economics has become a frenzied mania of stupidity.

 

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Is it, or do we just have an insane amount of exposure to everything going on, including foreshadowing.

If we look at this website as an example, every day we are fed a handful of stories for months on end about a recession or housing crash that will potentially last a shorter time than the hype leading up to it.

Everything's a disaster waiting to happen, that rarely happens.

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8

Is it, or do we just have an insane amount of exposure to everything going on, including foreshadowing.

What happens in Japan related to capital flows is very relevant to NZ. You're just not aware of how and why. 

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We exist in a system that's beyond our total comprehension, sure. So we try and attribute things to single root causes when there's way too many variables.

Objectively speaking most of us should be dancing a jig most mornings.

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Luckily Black Swans are endemic to NZ (& Australia), so we should be ok.

Not to be confused with the Covid Pandemic which is from bats, but if we get a Black Swan pandemic aka 'bird flu' then both the economy and our health could be in trouble. 

I'm starting to sound like an economist.

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...spending fell $166 million (2.5%) in December 2022 compared with November 2022, when adjusted for seasonal effects.

Finally consumers are starting to trim spending back. I was starting to wonder if there was something we weren't understanding because it took so long. Anyway hopefully this allows prices to fall rapidly, along with inflation, and the OCR can stabilise. Let's see how retailers respond.

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A Orr wanted to spook people, mission accomplished 

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5

... not just spooked , but incredibly pissed off  , too ...

The general public cannot vent their anger at Adrian , but they can send a message to those who chose to grant him another 5 years in the $ 890 000 p.a. job  ... 

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10

'Finally following Orr's advice'!!! What a foolish thing to say. People are spending more on non-substitutables (mortgages, rates, insurance etc) - so they have less to spend on consumables / durables. Jeez.

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An interesting metric to watch will be our services trade balance with Aussie with massive profits getting shipped out of NZ to the likes of the big-4 banks, IAG, QBE, etc.

What's reassuring is that some of those billions will eventually make their way back into our economy when high-paid workers and wealthy shareholders at those companies spend their holidays in Queenstown.

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Lower turnover for companies probably results in higher inflation as they try to fully recover their overheads

Brilliant

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the RBNZ is unlikely to wobble unless it is 110% confident inflation will settle in the 1-3% inflation target range

That is not going to happen, inflation will not drop to 1-3% but the RBNZ will be forced to lower interest rates anyway as NZ craters into a deeper recession. = Stagflation!

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Again, agree. Employment and financial stability are RBNZ mandates alongside inflation. If the CPI gets to 3.5-4% and employment is cratering - and financial stability is starting to wobble - the OCR WILL be cut.

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Todays Stuff Headline "Some household budgets will be crushed by rising interest rates this year, Westpac says"

New Zealand's Effective mortgage rate is currently 3.7% and will rise to 5.3% by the end of the year.

One third of NZ's 1.94 million households are servicing a mortgage on the house they live in. New Zealand has 337 Billion of total mortgage debt. So that is a rough average of 520K each per household. 1.6% additional mortgage interest will be 5.4 billion per year or $8300 per household average. 

What happens if you take an average of $160 per week of after tax income away from over half a million households?

We are about to find out.

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5

NewShrub have an item by Shamubeel Eaqub , who claims that Zealandia is already in a recession .... its just that the stats don't reflect it yet ...

... the lowest confidence rating ever by businesses since records began point a graphic picture as to how the government & the RB are performing  ... unless , of course , it's the previous govt's fault  ... ah ha haaaaaaaaaaa .... 

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It takes 6 months or so for the January stats to be issued (3 months after end of quarter) 

By which time we might be back in black. No wonder ardern and cronies are going to hold off the gen election till oct/nov

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Thats a lot, whats the result for the 10-15% most impacted, average only tells an average problem.  I am guessing its 3-4 times the impact 32k

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Westie 

 The lowest fixed term rate is 6 months @6.29 (Interest .co) so thats a 2.6 % increase which on a $400k mortgage is another $10,400 Pa in interest - discretionery spending will decrease substantially and longer rates are closing in on 7%, prediction severe pain ahead.

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sales a waste of time. Rebel Sport clothes was cheaper before Xmas than Boxing day.

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It's been a while since I worked in retail pricing and promotions (for a household name retailer). Even back then most sales were really more a marketing message designed to encourage more purchases through a perception of artificial scarcity than any great deal. Most of our best deals were genuine clearances at various times of the year or the odd 'door buster' in limited quantities, but otherwise you could usually get the same kind of discount any time of the year by asking, or at any weekend sale, weekly special etc.

It's only got worse since then. "Headline" sales e.g. Black Friday and Boxing Day have definitely become a whole lot less impressive, and just trade off the name in effect. For 2022 Black Friday I saw a couple of genuinely good deals (e.g. a $800 graphics card for about $350, which sold out very fast) but everything else was the usual approach of 'slap a sale sticker on it and hope someone is dumb enough to fall for it'. 

Retailer buyers/promotions teams will be under even more pressure in this regard to make a bigger deal out of worse discounts because of inflationary pressures on actually acquiring the stock. I suspect some retailers have cynically believed they could avoid any meaningful discounting as an inflationary environment means everyone is willing to pay more; they may come to rue that decision. 

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Used to work at Briscoes 2008, had to relabel all products in store as they hiked all prices by around 20%, then started having 60% off sales instead of 50%. Sales went through the roof and profits conjunctively. And we all thing we are getting better deals hah

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I am doing my part for Aotearoa, stop paying for movies and instead pirate!

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5

Theft is very deflationary 

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Stream movies and TV shows for free, brew your own beer, enjoy the simple things and save your money so you can grow it, life ain't so bad

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Stuff A O tea A ROWER!...  IF IM NOT WEALTHY ... IM NOT HEALTHY!

 

What I mean is if I don't look after Numero uno then I become  a liability to everybody and the economy!

 

 I'm over giving back! FFS!... I HAVE WORKED MY LIFE paying about 50% of my income to councils/ government( income tax)/  government departments/ and GST. The rest has gone to greedy retailers and banks to profit off.... So stuff it! ... It's "ME" time!

I am a greedy capitalist white male pig.... Buy I've paid for the priverlage!... And I don't give a rats rear end what the people who made bad/ dumb. Decisions think!...

 

....Unlike the greedy  benefit/ system bludging takers who seen to think they have all the rights and deem us " winners" as the aforementioned. But add the words racist, colonist's polluters to stir the  pot 

 

 

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1

I did a bit of a life audit over what might have passed as summer at a squint, and concluded that I don't want or need to spend much this year. Have enough clothes, house, stuff in house, car, kid set for school and hobbies, got bikes and sports gear, decent running shoes, devices all modern enough. We're very fortunate. 

Going to try and spend the bare minimum this year. Probably some diet changes. Alcohol is off the menu for a while and I've always been keen to go more vegetarian anyway, so now is the time to learn new things. 

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Me too, sold the farm no debt full pantry of food and freezers full is my inflation decelerator, still have small business but only prepared to make enough for me and Grant and other greedy parasites can sod off.

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Another "cluster F@$k" from Orr...

 

he calls out a recession 💥 boom💥

 

peeps stop spending👎

 

retailers stop selling 👎

 

retailers close down of layoff staff👎

 

unemployment climbs👎

​​​​​​Orr gets what he didn't want a RECESSION!.. BRILLIANT!

💥BUST💥..

.. THE GUYS A "DEAD SET" muppett

 

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Like the DEAD bit, is that you new years wish?

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