Consumers flash plastic as spending rises

The hospitality sector grew strongly over the year. Photo / Chris Gorman

Retail spending remained brisk last month, with electronic card transactions in the core retail sector, which excludes vehicle fuels, rising 0.8 per cent on February, seasonally adjusted.

For the March quarter as a whole core retail sales paid for by credit, debit or charge cards were up 2.7 per cent on the previous three months - the fastest quarterly growth since December 2006 - and up 7.2 per cent on the same quarter last year.

In real terms the growth is strong as estimates of annual inflation over the same period (to be reported on Monday) are very low, with ASB and Westpac economists picking 0.3 per cent, ANZ 0.2 per cent and the Reserve Bank zero.

"In the last six months consumers have come out of their shell after several years of fairly subdued growth," said Westpac economist Felix Delbruck.

"While it's a little surprising that this should have occurred so late in the piece, the stars are clearly currently aligned for stronger retail activity - petrol is cheap, mortgage rates are low, house prices are rising, and both migrants and tourists are arriving in high numbers."

Spending on transport fuel fell 0.4 per cent last month, the sixth monthly decline since the middle of last year. Total retail spending , including the automotive sector, was up 4.7 per cent.

ASB economist Nathan Penny said petrol prices rose around 5c last month, but they had fallen about 40c between November and January. He expects the overall fall to continue to boost disposable incomes and spending over 2015.

Recent interest rate falls were also boosting disposable incomes and the housing market, Penny said.

Spending on durables like furniture and household appliances was up 2 per cent in the March quarter and 6.5 per cent for the year.

Spending on consumables like food was also up 2 per cent for the quarter and 6.9 per cent for the year.

But the strongest growth was in the hospitality sector, up 3.5 per cent in the quarter and 10.6 per cent for the year.

Total spending growth at an annual pace of 4.7 per cent is likely to fall within the rate at which households' combined labour market income (jobs growth and wage rises) is increasing, especially as some of the spending growth is likely to reflect a surge in tourist arrivals.

That spending restraint would in part reflect modest wage growth, said ANZ chief economist Cameron Bagrie.

"But it is probably more reflective of what appears to be a structural change in behaviour," he said.

"Where previously spending was being fuelled by debt, it is now more a case of spending within one's means."

Card spending
2.7% rise in core retail sales in March quarter versus previous three months.
2% rise on durables for the quarter and 6.5% for the year.
2% rise on consumables for the quarter and 6.9% for the year.
3.5% rise in hospitality sector for the quarter and 10.6% for the year.