Electronic card spending growth stalls in July

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New Zealand spending on debit and credit cards stalled last month as expenditure on fuel fell 3.1 per cent.

The value of total electronic card transactions edged down a seasonally adjusted 0.2 per cent in July, according to Statistics New Zealand, ending five months of growth.

Still, core retail spending, which excludes motor vehicle-related buying, rose 0.7 per cent as people spent more on food, liquor and chemist retail items.

Philip Borkin, economist at Goldman Sachs JBWere said his industry contacts suggested that retailers were still having to discount aggressively in order to get foot traffic and drive turnover.

"This partly explains the lacklustre nominal spending growth. It is clear that the retailing environment remains challenging."

Christina Leung, economist at ASB Bank, said the core spending increase in July was largely driven by an increase in spending on consumables and durables.

"Given food makes up a large part of spending on consumables this suggests a continued recovery in food prices in the July month. Meanwhile, the increase in spending on durables may be partly due to households starting to bring forward purchases of big-ticket items ahead of the GST increase in October. We expect to see more of this in the coming months."

Leung said she expected the recovery in household spending to continue at a slow pace.

"Recent labour market data points to subdued wage growth, which means households will remain cautious in the near term. Reflecting this, optimism of increased sales amongst retailers shows signs of waning in more recent business surveys. Nonetheless, the impending GST increase is likely to encourage sales of durable goods in the near term."

ANZ economist Mark Smith said growth in core retail spending was "continuing at a respectable pace" with growth in the last 3-months running at 1.4 per cent (up from 0.5 per cent last month).

"We expect that retail momentum will strengthen as the labour recovery gains momentum and wage growth recovers from decade lows. For the moment, however, retail spending growth remains moderate as households focus on other priorities," said Smith.

"Evidence of a pre-GST spend-up in durable spending is slowly becoming evident, with discounting in this sector also implying that underlying retail volume growth is stronger than implied by the nominal figures."

Consumer confidence has taken a dent, with the ANZ Roy Morgan survey showing consecutive declines in the past two months as people feel worse off than they did a year ago.

That comes as the unemployment reversed its decline last quarter, with the rate rising back to 6.8 per cent in the three months through June from 6 per cent in the March quarter. It had previously reported its biggest quarterly drop from a revised 6.8 per cent in the December period.

Credit card use continued to fall as a proportion of card spending, dropping to 43.9 per cent of transactions, the lowest level since the series began. Still, Credit card billings rose 2.6 per cent in June from the same month a year ago, according to Reserve Bank data.

The retail trade survey for June is released on Friday. Spending on electronic cards accounts for about 61 per cent of all retail spending, and excludes cash and cheque purchases and hire purchase arrangements.

- WITH NZ HERALD