Retail spending rebounds in January but monetary policy still holding us back

Spending on apparel, which includes clothing and other soft-goods, rose 3.1 per cent in January compared to the prior month. Photo / 123rf

Retail spending rebounded in January from a weak December but remains flat as monetary policy continues to hold back spending, an ASB economist says.

Figures for electronic card transactions, released by Stats NZ today, show spending in the core industries (consumables, durables, hospitality, and apparel) increased 1.9 per cent, or $109 million, in January compared with December 2023.

Retail spending (which includes core retail and the motor vehicles and fuel industry groups) rose 1.7 per cent ($114m) in January.

Spending on durables was up $28m (1.8 per cent); apparel rose $10m (3.1 per cent); consumables were up $9.3m (0.4 per cent); fuel increased $9.1m (1.6 per cent); and motor vehicles (excluding fuel) rose $1.8m (0.9 per cent).

Non-retail spend - which includes medical, healthcare and travel and tour arrangement - increased by $60m (2.7 per cent) from December 2023.

The total value of electronic card spending increased $187m (2.0 per cent) in January compared to December.

ASB economist Nathaniel Keall said monetary policy is clearly continuing to hold back spending.

He said while card spending over January showed some life, it does cover a holiday-affected month.

“New Zealanders’ holiday (and associated spending) activities have gone through gyrations over the past few years, which makes seasonal adjustment more difficult,” Keall said.

“The figures will also include spending by overseas tourists during peak season, though the peak has also been shifting in recent summers as inbound tourism has built back up after the border opened.”

Keall said the trend in spending remains muted as card spending values have largely gone sideways since mid-2023.

“Bearing in mind that annual inflation is running around 4.5 per cent and population growth around 3 per cent, annual card spending of 4.1 per cent in total (and 1.6 per cent for the retail segment) implies continued contraction in per-capita card spending volumes.

“The rebound in card spending won’t ease the Reserve Bank’s worries about whether or not it will bring inflation under control sufficiently for its liking. Nevertheless, we still expect the RBNZ to remain on hold.”

Westpac economist Satish Ranchhod said they expected continued softness in spending over the year ahead.

“Individual households are getting a lot less in their shopping baskets as financial pressures continue to bite,” he said.