Spending in August down 8% - weak economic outlook forecast ahead of Christmas

A pull back in dining out in August pulled retail spending down in August as alert level restrictions were increased. Photo / 123RF

Retail spending on electronic cards fell by 7.9 per cent in August, in line with economist forecasts, following Auckland's move back into alert level 3.

The sharp drop in spending in the month was centred around a pull back in spending within the hospitality sector.

Overall retail card spending fell by $530 million in August from levels recorded in July.
Compared to the same time a year earlier, electronic spending in the month was $5.4 billion, down $46m or 0.8 per cent from August 2019, according to the latest spending data from Stats NZ. In contrast, retail spending in July 2020 was up $610 million (11 per cent) on July 2019.

Spending on food and beverage services, including at cafes, restaurants, takeaway food and bars, fell 13 per cent - by $115 million - in August. This followed a 11 per cent increase in spending in the sector in July, data released by Stats NZ shows.

Spending in accommodation also fell in August, down 41 per cent or $77m compared to the same time last year.

Figures from Paymark show spending was significantly impacted by Auckland's return to lockdown, dropping by 26 per cent on August 16 and ending the month two weeks later down 42 per cent.

Underlying spending recovered quickly following the move to alert level 2, up between 50 and 100 per cent at some retailers on the first day of eased trading restrictions.

Spending in the regions was mixed at the tail end of August - up 4.8 per cent in Northland, 2.1 per cent in Hawke's Bay but down 14.7 per cent in Otago and 5.1 per cent in Southland, likely feeling the toll of no incoming international tourists.

Categories experiencing the largest declines both in and outside Auckland in August were electrical and electronic goods, down 11.4 per cent, clothing and footwear, down 27.5 per cent, and accommodation, down 36 per cent.

ASB says the 7.9 per cent drop in retail spending in August was weaker than its expectations.

The bank said the higher alert levels, the move to alert level 2 across New Zealand and level 3 in Auckland in the month, "significantly dented" apparel retailing - down 28.1 per cent month on month - and hospitality spending, down 19.7 per cent from July.

Spending in both categories was now 16-18 per cent below February 2020 levels, ASB said.

"While the lowering on alert levels in Auckland points to some pent-up demand being unleashed in the coming months, we remain guarded on retail prospects given the large economic toll imposed by Covid-19 points to weaker economic prospects ahead given mounting job losses, few overseas visitors and weak household income growth."

It warned that a "much softer" retail climate was ahead as the country moved towards Christmas.

The only sector to report an increase in August was consumables - up 3.7 per cent, ASB said this suggested consumers had learned from the April lockdown and were not doing as much panic buying at grocery stores and supermarkets a second time round.

Spending on groceries tends to get a boost from households stocking up when health concerns rise, Westpac said.

The bank said weekly spending data from MBIE showed that the fall in spending in August was heavily centred on Auckland. However, spending dropped in all regions.

"Spending in areas outside of Auckland looks like it was actually a little weaker than the last time the country was at alert level 2. Again, much of this weakness has been in the embattled hospitality sector which is wrestling with not only the loss of international tourists, but also the loss of holiday spending by Aucklanders," Westpac said, adding that it expected spending levels to improve in September.

"While overall spending levels appear to be recovering, the recent lockdown has left many retailers with even larger holes in their earnings this year, particularly in the hospitality sector."