"Add to this the effect of inflation creating higher prices that affected this spending, and the overall picture continues to be a tough trading environment for retailers," Putnam said.
Greg Harford, Retail NZ chief executive, said spending has slowed as consumer confidence has faltered.
"The ongoing Covid restrictions and work from home arrangements are still keeping some customers at home, and away from CBD retail in particular, but consumers are feeling less confident as interest rates have risen and the housing market has slowed," Harford said.
"Consumers are also reprioritising their spending to take account of the high-inflation environment, perhaps trading down to cheaper brands or reallocating their discretionary spend."
Annual inflation is at a three-decade high, hitting 6.9 per cent for the year to March 31 - the largest annual increase since the June 1990 quarter.
Putnam said spending in merchant groups such as appliances, furniture, apparel, bookshops and jewellery was consistently running below year-ago levels.
On the plus side, spending in the service sector was continuing to improve since Covid-19 restrictions had been lowered.
Annual spending growth in May 2022 at movie theatres was up 17.8 per cent compared to a 6.4 per cent decline the previous year.
The beauty and hairdressing group was up 3.2 per cent.
Spending at restaurants and cafes continued to struggle, remaining down on last year with an 11.5 per cent drop.
Spending in the hospitality sector, which includes restaurants, cafes hotels and motels, was $888 million in May, down 7.4 per cent on May last year.
Hospitality New Zealand chief executive Julie White said Covid continues to be a disruptor to the recovery of the hospitality and accommodation sectors.
White noted that the sector had seen strong demand and spending in April, however, this trend flattened in May.
"The key influences to the downturn in spending in May can be directly attributed to fuel prices, inflationary pressures which have had an impact on consumer confidence resulting in less people going out as well as consumer spending less," she said.
"Working from home continues to impact the restaurants, cafes and bars, especially in metro locations like Auckland and Wellington."
Auckland remained at Covid alert level 3 or higher (albeit with some eased restrictions under level 3) from August 17 last year until December 2, when the country moved into the Covid-19 Protection Framework, or traffic light system.
New Zealand moved to the orange setting of the framework in mid-April, bringing an end to limits on indoor gatherings.
Under red, people visiting indoor hospitality venues, events and gatherings were limited to 200 people at a time.
However, mask-wearing remains in many indoor locations and on public transport and domestic flights.
