Stats NZ data released today showed a slump in retail spending for the last two consecutive quarters. Photo / Supplied
Stats NZ data released today showed a slump in retail spending for the last two consecutive quarters. Photo / Supplied
Retail sales have slumped for the second quarter in a row and some economists say the downturn could keep squeezing Kiwi households for some time yet.
Stats NZ said the total volume of actual retail sales fell 4.1 per cent in the March 2023 quarter compared with the March 2022quarter. This followed a 4.0 per cent drop in the December 2022 quarter on the December 2021 quarter.
Hardware, building and garden supplies retail sales were down 13 per cent while motor vehicles and parts were down 7.5 per cent in retail sales.
Meanwhile, food and beverage service sales were up 14 per cent and accommodation was up 19 per cent.
“Decreased volumes in hardware and vehicle retailing helped drive a fall in total retail sales in the March 2023 quarter, compared with the March 2022 quarter,” Stats NZ business financial statistics manager Melissa McKenzie said.
After seasonal patterns were removed, as well as price effects, total retail sales volumes fell 1.4 per cent in the March 2023 quarter compared with the December 2022 quarter. This followed a 1.0 per cent decrease in the December 2022 quarter.
Stats NZ data showed the seasonally adjusted total volume of sales was down 1.4 per cent in the March quarter compared with December 2022, at $26 billion.
The total value of seasonally adjusted retail sales in the same period was $30b, down 0.3 per cent on the previous quarter.
Pharmaceutical and other store-based retailing was down 3.1 per cent on the previous quarter while motor vehicle and parts retailing was down 2.8 per cent, with clothing, footwear, and personal accessories sales up 3.8 per cent.
Seasonally adjusted sales showed fuel retailing was down 5.6 per cent on the prior quarter.
The data also showed department store spending was up 14 per cent on the previous quarter while electrical and electronic goods spending was down 27 per cent.
First Retail managing director Chris Wilkinson said the data showed Kiwis’ subdued appetite for spending but also pointed to the impact of post-pandemic travel and accommodation spending.
Wilkinson said local businesses were able to reap the benefits of a lack of overseas and travel spending during the pandemic, but with less concern now about cancelled flights and lockdowns, consumers were spending more in this area than retail.
Weakened household spending
He said cost of living pressures could also be causing consumers to pull back from retail spending.
“Cost of living and inflation is unprecedented in recent times and this is having an impact across most demographics,” Wilkinson said.
He said the supermarket and food spending changes were likely to stem from rising food prices.
ASB senior economist Kim Mundy. Photo / Supplied
“People are buying less and paying more,” Wilkinson said.
He said that showed consumers were “being more purposeful with their shopping and spending habits”.
Westpac senior economist Satish Ranchhod said today’s retail spending report highlighted how financial pressures were eating away at households’ purchasing power.
Ranchhod said nominal retail spending levels excluding motor vehicles were up 0.7 per cent in the first three months of the year. That masked significant and growing pressure on households’ finances, he said.
“With prices continuing to rise at a rapid pace, the actual amount of goods we’ve been able to afford has declined sharply, falling 1.4 per cent in the first three months of the year.
“Over the past year, nominal retail spending levels have increased by 4.7 per cent while the amount of goods sold has fallen 4.1 per cent.”
Ranchhod added: “We expect the pressure on households’ finances will become increasingly stark over the year ahead. Consumer prices are continuing to rise rapidly and increasing numbers of households are rolling on to higher fixed-term mortgage rates. Those factors will be an increasing drag on spending levels.”
ASB Bank senior economist Kim Mundy said retail sales volumes were “much weaker in Q1 2023 than either ourselves or the market expected”.
Mundy said the pivot to pre-pandemic spending habits was holding up spending in some sectors.
“Elevated net migration is likely to underpin consumer durables volumes as the year progresses. But demand from elevated net migration can also support retail volumes more broadly,” she said.
“We have been saying for a long time that the retail sector was going to face a very challenging time, and it appears that that time has arrived.”
