Spending growth is expected to stay weak this year after electronic card spending rose a modest 0.4% in May after a larger 2.1% fall in April.
Analysts were forecasting a 1.2% gain for the month.
Westpac senior economist Satish Ranchhod said after smoothing through month-to-month volatility, it appeared after a solid start to the year, momentum in retail spending has faded.
“In fact, except for a holiday related rise in March, retail spending has essentially been flat since January.”
Actual retail spending using electronic cards was $5.2 billion in May 2018, up $208 million (4.2%) from May 2017, Statistics New Zealand figures showed.
Card spending rose in three of the six retail industries in May. The largest movements were:
- Consumables, including grocery and liquor retailing, up $28 M (1.4%), rebounding from April's 3.6% fall.
- Fuel, up $6 M (0.9%).
- Apparel, including clothing, footwear, and accessories, down $5 M (1.8%).
Ranchhod said the flattening off of spending had been seen across nearly all categories. There had been “particular softness” in spending on apparel, which has been falling for several months.
Durables spending remained elevated, but had stopped climbing, and was likely to be challenged by the slow-down in the housing market now under way, he said.
“In large part, this is due to the impact of policy changes aimed at cooling the housing market, which will have flow-on effects for household spending. We also expect to see population growth moderating from current very high levels.
“On that front, we've already seen net migration easing back for several months now.”
ASB senior economist Mark Smith also did not expect a strong turnaround in retail spending.
Slowing employment growth was expected to contribute to modest gains in labour incomes and retail spending.
Softer recent readings for consumer confidence, prospective rises in petrol prices and the flat housing market were expected to prompt restraint for core spending.
The official cash rate looked set to remain on hold at 1.75% in the current environment, he said.
*Dene Mackenzie is business editor of the Otago Daily Times.