Weak household related spending emerges

New Zealand retail spending on electronic cards fell for a second month in March. Photo / Nick Reed

New Zealand retail spending on electronic cards fell for a second month in March, as weakness emerges in household related spending.

Retail spending on credit and debit cards fell a seasonally adjusted 0.3 per cent last month, following a 0.6 per cent decline in February, Statistics New Zealand said. The declines come after a 2.7 per cent increase in January, the biggest monthly increase since January 2006.

Spending fell in three of the six retail industries in March, with fuel retailing recording the largest drop due to price declines, down 1.9 per cent. Consumables spending fell 0.2 per cent, while durables spending fell for the fifth month in six, down 0.3 per cent.

"This (durable) category includes items like home furnishings, and the recent softness may be a symptom of the slowdown in the housing market since late 2016 following last year's tightening in lending standards and a rise in mortgage rates," said Westpac Banking Corp senior economist Satish Ranchhod.

"The recent softness in spending does follow a solid gain in January, and on an annual basis spending growth still looks healthy," Ranchhod said. "However, given the strength of population growth and the strong tourist season, there should naturally be some momentum in spending. Consequently, the recent softening in spending does raise some flags, especially in the context of a slowdown in the housing market and upwards pressure on interest rates. This will be an important area to watch over the coming months."

Today's figures show core retail spending, which excludes vehicle-related industries, dropped for the fourth month in five, down 0.1 per cent in March from February.

Hospitality spending edged up 0.1 per cent and apparel spending advanced 0.8 per cent, with Westpac's Ranchhod saying poor weather may be having a dampening effect. Vehicle spending rose 1.5 per cent, as vehicle sales continue to break new records.

Of the non-retail industries, non-retail excluding services advanced 0.6 per cent from February while spending in the services industry rose 1.1 per cent.

Actual retail spending climbed 5.6 per cent to $5.2 billion in March from the same month a year earlier.

Card-holders made 143 million transactions in March, up from 128 million in February and 133 million in March last year, with an average value of $49.