Card spending rebounds

Contactless payments may have helped boost card spending late last year. Photo / Getty Images

Retail sector transactions up last month but longer view suggests loss of momentum: expert.

Consumers' plastic cards saw more of the light of day last month, but the trend suggests some loss of momentum in retail spending.

The value of card transactions in the retail sector rose a seasonally adjusted 0.9 per cent to $4.58 billion in February - 5.8 per cent up on the same month last year. It had dipped 0.5 per cent in January.

In the core retail sector, which excludes petrol stations and car yards, card transaction rose 1.1 per cent in the month, reversing a 0.7 per cent decline in January, to be 4.8 per cent ahead of February 2013. Statistics New Zealand estimates card transactions capture 69 per cent of core retail sales.

Westpac economist Felix Delbruck said a rebound in spending from January's surprising decline was to be expected.

"However, taking January and February together still suggests that card spending lost momentum in the new year."

Statistics NZ's trend measure, which adjusts for seasonal and irregular short-term fluctuations, has slowed steadily for core retail spending over the past three months.

The very strong growth in card spending in late 2013 - a cumulative 3.9 per cent in the last three months of the year in core retail sales - might have been partly through increased penetration of cards, possibly in response to the rise of contactless payment, Delbruck said.

"So the recent slowdown doesn't necessarily indicate a slowing in overall retail demand," he said.

"What does seem clear is that retail spending has picked up less in the last six months than we might have expected on the back of significant lifts in consumer and retailer confidence."

ASB economist Daniel Smith said spending on durables such as appliances and furniture was boosted by increased housing market activity over 2012 and 2013, with home buyers looking to furnish their new homes and higher house prices potentially inducing big-ticket purchases through equity withdrawal or just higher confidence among households.

"Over recent months, however, growth in the durables category has slowed noticeably. Annual growth reached nearly 8 per cent in August-October last year, but has now dipped to just 4 per cent. And out of the last six months, four recorded a decline in month-on-month spending. That is perhaps not surprising given lower housing market turnover."

Spending in the largest category, consumables (which includes food), rose just 0.1 per cent after a 0.5 per cent fall in January and is up just 2.5 per cent on February last year.

By contrast hospitality sector spending goes from strength to strength, rising a seasonally adjusted 1.5 per cent last month to be 12 per cent up on a year ago, reflecting high levels of consumer confidence and strong visitor arrivals numbers, according to Smith.

Flash the plastic

$4.58b seasonally adjusted retail sector card transactions in February
0.9% rise on January
5.8% up on last year
(Statistics NZ)