Good news at last for retail- new year card transactions up

Photo / Bay of Plenty Times

Spending on debit and credit cards rose 2.2 per cent in January, after a disappointing Christmas shopping period.

Statistics New Zealand said the rise was the largest, when adjusted for seasonal effects, in five years and followed a 1.2 per cent fall in spending in December.

All industries recorded increases in January 2011.

The value of transactions in the retail industries was up 2.4 percent in January 2011, the largest increase since January 2006.

This latest increase follows a 0.8 percent decrease in December 2010.
The value of transactions in core retail (which excludes the motor vehicle-related industries) was up 2.4
percent in January 2011, the largest increase since December 2002.

This follows a decrease of 1.6 per cent in December 2010, the largest decrease since November 2002.

The January increase in core retail was led by the consumables and durables industries.

Consumables(which includes food and liquor retailing) rose 1.3 per cent, and durables (which includes furniture, hardware, and appliance retailing) increased 1.8 per cent.




Goldman Sachs NZ economist Philip Borkin said electronic card spending "rebounded solidly" in January after what had been a "terrible quarter" for retail.

"However, our overall views on the consumption outlook remain unchanged. We expect only modest real spending growth as households continue to focus on deleveraging," he said.

Today's data was 'slightly at odds' with the latest Paymark data, which had showed a monthly increase of just 0.9 per cent year on year.

"Despite this monthly movement though, the underlying trend in spending is one where necessities are continuing to outperform, while durable and discretionary spending growth is subdued," said Borkin.

This January 'positive surprise' did not alter Borkin's views towards the consumption outlook for 2011.

"For the 3-months to December, total electronic card spending was up just 0.4 per cent compared with the September quarter, while core spending was down 1.3 per cent. Real spending will be much weaker. Hence it is possible that timing issues are at play."

"While we believe the labour market backdrop is modestly improving (although interpretation of volatile data is challenging) and disposable income growth looks solid with the help of personal tax cuts, ongoing deleveraging given weak house prices will keep a lid on spending," said Borkin.

"In addition, further likely increases in food and petrol prices will keep the pressure on household budgets and will contain discretionary spending."

Trends for the value of transactions in the total and retail series have continued to increase since early 2009, said Stats NZ.

The trend for the core retail series has generally been increasing since the series began in October 2002, but has eased in recent months.

Electronic card transaction figures, which cover debit, credit, and charge card transactions with New Zealand-based merchants, include goods and services tax (GST).

- NZ HERALD ONLINE