Modest rise in consumer spending shakes off soft patch: economist

By Brian Fallow

Spending on consumables rose 0.8 per cent. Photo / Kellie Blizard
Spending on consumables rose 0.8 per cent. Photo / Kellie Blizard

Retail spending charged to electronic cards rose 0.3 per cent last month, driven by food and fuel, according to data from Statistics New Zealand.

The seasonally adjusted increase was the same as recorded in December and took annual growth in spending paid for with the plastic (which represents two-thirds of all retail spending) to 4.7 per cent.

"Consumer spending is back on to the modest upward trend of the last few years, shaking off its September quarter soft patch," Westpac economist Michael Gordon said.

"While nominal spending is growing only slowly, subdued price pressures, and indeed falling retail prices, are helping to lift spending in real terms."

He expects the December quarter retail sales figures, to be published on Friday, to show a 2 per cent bounce in volume terms.

Spending on consumables, which includes food, rose 0.8 per cent last month.

ASB economist Daniel Smith said consumables spending had risen by about 2.6 per cent over the past three months, after a year of fairly lacklustre growth. Spending on durable items such as furniture and appliances fell 0.4 per cent. But a correction was no surprise after three months of strong growth, in line with increased activity in the housing market, he said.

Spending on vehicle fuel rose 1.9 per cent, to be 9.5 per cent up on January last year.

Deutsche Bank chief economist Darren Gibbs said the outlook for consumer spending this year was one of steady but not spectacular growth, supported by consumer confidence at reasonable levels, modest growth in wage and salary incomes and somewhat stronger growth in household wealth as a result of rising house prices in particular.

Smith said positive net migration flows over late 2012 would add further impetus to consumer spending, especially if they were sustained over this year.

But consumer spending remained constrained for now by high levels of household debt and ongoing weakness in the labour market, he said.

Infometrics' Matt Nolan said a trend of continuing consumer caution was illustrated by the low proportion of card spending that involved credit rather than debit cards.

"A seasonally adjusted 43.2 per cent of the value of electronic card transactions was on credit cards, well down on its average level of 45.2 per cent."

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_a4 at 02 Sep 2014 19:48:18 Processing Time: 742ms