“Much of the rise in spending over the past month was related to increased spending on groceries and, in part, that will reflect the large price increases for items like butter.”
June also saw a fall in petrol prices, which would have put money back into households’ pockets, supporting spending in other areas, Ranchhod said.
There were some positive signs under the surface, with a pick-up in discretionary spending categories like durable and apparel, he said.
“On the downside, hospitality spending fell again in June, dropping 0.3% over the month,” Ranchhod said.
“Hospitality spending has trended down for the past six months, with many operators reporting tough trading conditions.”
Retail spending growth has been subdued through the first half of the year, he said.
The combination of a slowing labour market, increased economic uncertainty, and continued cost-of-living pressures had all weighed on spending appetites.
Westpac expects spending activity to remain subdued over the next few months.
However, there was relief coming for many households, Ranchhod said.
The past year has seen large reductions in borrowing costs.
“Compared to this time last year, fixed-term mortgage rates are around 170 to 200bps lower,” he said.
“The full impact of those declines is yet to be felt as most New Zealand mortgages are fixed for a period.”
Over the next six months, around half of all mortgages would come up for refixing, giving many borrowers the chance to secure a much lower rate, he said.
“The related increases in disposable income levels will be a boost for sentiment, and that should support a gradual recovery in spending as we approach the end of the year.”
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist and also presents and produces videos and podcasts. He joined the Herald in 2003.
