Card spending edged up ahead of GST hike

Photo /Dean Purcell

New Zealand spending on credit and debit cards edged up during September, as consumers stocked up on household goods, food and petrol ahead of the rise in GST.

Statistics New Zealand (SNZ) figures showed transactions for core retail rose 1.4 per cent during the month, led by a 4 per cent increase in spending on furniture, hardware and appliance retailing - the biggest rise in the industry in more than three years, Statistics New Zealand said.

At least some of the increase in the retail industries "was likely to
reflect" additional spending ahead of the GST rise, SNZ's business statistics manager Louise Holmes-Oliver said.

Spending on food, liquor and chemist products increased by 1.1 per cent during the period, while fuel spending increased 2.9 per cent.

The value of transactions in the retail industries was up 1.5 percent, SNZ said.

ASB economist Christina Leung said the result was modest compared to the last time GST in 1989, but still represented a strong result for a September month.

"These results are in line with reports from Paymark earlier last week of a rush on the last day of September to fill up on groceries and petrol ahead of the GST increase the next day."

"In particular, there was much publicity towards the end of September that petrol would increase by 7 cents per litre at the start of October as a result of an increase in GST and excise taxes."

Leung said a decline in spending on durables was likely in October.

However, the broad-based nature of the improvement in spending in September suggested a recovery in retail spending remained in place, she said.

"This is encouraging in light of the subdued results seen in recent business surveys, and suggests retailers' expectations of an improvement in sales will eventuate," she said.

When the non-retail industries (which include services such as travel and health, and wholesaling) are included, the total value of transactions rose by 1 per cent.

The non-retail industries were down 0.4 percent during the month.

Trends for the value of transactions in the total and retail series have both picked up in the last few months.

The core retail trend flattened after June 2009 but has been rising steadily since March (up 3.3 per cent).

ANZ economist Mark Smith said the monetary policy implications of today's release were limited.

"We do not see the RBNZ moving until early 2011," he said.

Smith said he expected retail momentum would strengthen as the labour recovery gains momentum and wage growth recovers from decade lows.

"With 2010 rapidly approaching an end, this is a 2011 story," he said.

Annually, credit card use, as a proportion of the total transaction value, has been falling for the last two years, against a rise in debit card use.

Credit cards accounted for 43.8 percent of transactions in the year to September 2010, the lowest proportion since the series began in November 2002.

- Susie Nordqvist with BusinessDesk