Retail spending: Rising interest rates yet to dampen shopping appetite

Shoppers have their cards out and are still spending, according to StatsNZ.

Higher interest rates don’t appear to have deterred Kiwis from getting their cards out and shopping in February.

Retail card spending remained steady at $6.6 billion in February 2023 compared with January 2023, when adjusted for seasonal effects, according to data released by Stats NZ today.

The Reserve Bank is looking for signs that demand is easing in the economy as it assesses how high rates will need to go to get inflation under control.

Today’s data won’t offer much to reassure them that demand is slowing.

Where there were some signs of lower spending it was likely related to the impacts of Cyclone Gabrielle, ASB senior economist Mark Smith said.

While retail spending remained robust, the February storms caused some deferral of service activity as well as spending in hospitality, and apparel, he noted.

Spending rose across most of the retail spending categories. The rises were led by spending on durables (furniture, hardware, and appliances) and consumables (groceries and liquor).

Durables rose $48 million (2.9 per cent) while consumables increased by $32m (1.2 per cent).

The only retail category to decrease was apparel (clothes and shoes), down $11m (3 per cent).

The services category was down just 0.2 per cent. This category includes repair and maintenance, and personal care, funeral, and other personal services.

The total value of electronic card spending, including the two non-retail categories (services and other non-retail), decreased from January 2023, down $155m (1.7 per cent).

Because of the effect of Covid-19 on tourism, StatsNZ doesn’t release seasonally adjusted figures for the hospitality industry.

Spending in the hospitality industry increased 33.8 per cent ($296m) between February 2022 and February 2023.

In actual terms, cardholders made 151 million transactions across all industries in February 2023, with an average value of $56 per transaction. The total amount spent using electronic cards was $8.4 billion.

The weather events in February were ultimately likely to give inflation a boost and the RBNZ was expected to press on with OCR hikes, Smith said.

“We are likely to see a boost to services, [durables] and apparel spending in the coming months as repair work starts and as damaged goods are replaced,” he said.

“We expect a further 50bps [rise, with a 5.25 per cent OCR peak], but the RBNZ could press harder on the monetary policy brakes if it is spooked by the risks of higher for longer inflation.”