Shoppers spend more on cards as they shake off recession blues

Photo / Steven McNicholl

Electronic spending rose slightly in December, confirming reports of a brightening of consumer confidence.

The increase appears to back the findings of a survey reported in yesterday's Herald which showed people were planning to splash out after a year of belt-tightening.

However the economy is predicted to take many months yet to completely shake off the after-effects of a recession which officially ended last June.

Paymark, the network which processes three-quarters of electronic transactions, recorded a 3.9 per cent increase in the value of spending in December compared with the same month in 2008. But removing petrol outlets lowers that to 2.6 per cent.

Bank of New Zealand economist Stephen Toplis said yesterday that the figures were "consistent with everything else we are hearing about that quarter".

"And that is that while things were a marked improvement on some of the miserable quarters earlier in the year, there's no evidence the economy is gaining a particularly fast head of steam.

Overall there's every reason to believe 2010 will prove to be a much stronger year than 2009 was. These data are consistent with that.

But it would be premature to dance in the streets thinking we are completely out of the woods because there are a number of serious risks confronting both the domestic and the global economy.

"It won't be until around the end of the September quarter that activity levels across the economy get back to the peak [of] March 2008."

The annual CPI inflation figure for December is not yet available, but for September it was 1.7 per cent and the Reserve Bank expects it to remain below 2 per cent this year.

Retailers Association chief executive John Albertson said this suggested the real growth in the value of Paymark transactions, excluding petrol outlets, was around 1 to 1.5 per cent.

"It isn't huge, but it certainly is a step up from where the market was operating last year. Until December, the market was flat."

Paymark said its figures revealed a marked increase in some luxury and "feelgood" spending: jewellery shops experienced 9.3 per cent growth, restaurants and cafes were up 8 per cent and hairdressing 7.5 per cent. But some sectors that usually performed strongly in December - hardware, DIY and camping/sporting outlets - "did not enjoy similar performance".

Mr Toplis said the disparity between the increases in the value and volume of transactions suggested either that prices had been heavily discounted or that people were buying cheaper products.

"It's a good time for consumers to spend ... Certainly the level of discounting we have seen is probably not sustainable," said Mr Albertson.

HOW MUCH

Value of electronic transactions through the Paymark network:

* $4.304 billion, December 2009.
* $4.143 billion, December 2008.

Number of transactions:

* 80.7 million, December 2009.
* 75.8 million, December 2008.