Retail spending recovered slightly in the first quarter but economists expect further softening as falling house prices and weak business confidence bites.

In the first three months of the year, electronic card transactions totalled $15.5 billion, according to payment terminal firm Paymark.

Paymark, which processes 75 per cent of the country's card transactions, said spending rose to a seasonally-adjusted 0.9 per cent versus the December quarter, and was up 1.3 per cent when spending at fuel merchants were excluded.

However, both rates remain below the average of the past five years, with flat growth in the March quarter following a reasonably flat Christmas period, Paymark said.


Darren Hopper, head of e-commerce, digital experience and marketing at Paymark, said softening house prices and weak business confidence had impacted spending in the March quarter.

"It does have an impact on people's desire to spend more," Hopper said. "The monthly spending pattern can be volatile, as has been the case in the last six months. So too have the quarterly figures of late but a clear pattern has emerged of spending growth having decelerated."

The slowdown in spending growth was more noticeable in the South Island, he said.
In March, spending through the network totalled $5.3b, up 2.5 per cent versus March 2018 in underlying terms.

"With the combination of lower business confidence and softer house prices, I think consumers are really thinking about their spend," Hopper said.

The total volume of transactions in the March quarter increased by 3.7 per cent.

"People are still spending but those bigger purchase are being more considered. It's those lower value transactions which are keeping transactions up."

Stats NZ will publish electronic card transaction data for March on Friday.

Westpac Bank expects that data to show a 0.4 per cent lift after a 0.9 per cent lift in February. "Recent increases in petrol prices will dampen spending in other areas.


"There has also been softness in the housing market that will dampen spending appetites," it said.

ASB senior economist Mark Smith said there were signs the slowing housing market was having an impact on retail spending in Auckland.

ASB economist Mark Smith.
ASB economist Mark Smith.

He put weak spending growth down to the spike and volatility in fuel prices. "What that tends to mean is consumers will look at their discretionary spending a bit more carefully."

Consumer confidence was also weak in the first quarter, he said.

"If weak business confidence does flow through to weak economic activity, and that's certainly the worry the Reserve Bank have at the moment, then you will see that come through and effect consumers."

Consumers had "a very good run" in the past few years but Smith said he expected to see a slowdown in retail spending over the next three to six months. "We'll move from very, very good towards the middle."

Retail NZ general manager of public affairs Greg Harford said retailers had reported a slowdown in spending over the past quarter.

He said consumers were not feeling as wealthy as they once were due to softening of house prices and increased costs hitting households such as council rates and insurance bills in some parts of the country.

BNZ senior economist Craig Ebert said spending growth was "middling".

"Looking further ahead, we think the rate of growth will, if anything, keep slowing but nothing as we would describe as alarming or sub-standard. A lot of the slowdown is in line with what we were expecting on the jobs side of things."

Ebert countered other views and said house prices were still going up but he expected retail spending to be "steady" in the next few months: "Not strong but not weak. By the time we move into the middle of the year and towards the end consumer spending will be what we call middling."