In March, retail spending in New Zealand fell by 0.7 per cent compared to February, following a 2 per cent decline in the previous month. This downward trend, characterized by Westpac senior economist Darren Gibbs as “very weak,” underscores the challenges facing the retail sector.
Despite a 3 per cent increase in goods price inflation and a population growth of close to 3 per cent, nominal spending in March was 3.0 per cent lower than a year earlier, indicating a sustained downturn in real per capita spending over the past two years.
The impact of this decline is felt across various retail categories, with apparel and fuel experiencing the most significant drops. Core retail spending, excluding fuel and motor vehicles, also decreased by 0.6 per cent, reflecting a cautious approach to discretionary spending among consumers.
Examining quarterly data provides further insights into the dynamics of retail spending. While there was a modest increase in retail spending for the quarter, led by durables, declines were observed in fuel, motor vehicles, and apparel. This mixed picture underscores the complexity of consumer behaviour in response to economic conditions, with some sectors faring better than others.
The cautious approach to spending is also evident in other economic indicators. ANZ’s merchant and card spending data for March showed lower annual growth in total spending compared to the previous month, with clothing retailers, restaurants and bars particularly affected. This indicates a broader trend of reduced discretionary spending, mirroring the sentiments expressed by Gibbs and other economists.
Despite a slight increase in spending over the Easter trading period, overall spending remains subdued. Population growth and rising prices have contributed to a modest increase in spending, suggesting tepid consumer confidence and subdued economic activity.
Looking ahead, the outlook for New Zealand’s retail sector remains uncertain. With households expected to remain cautious amidst high inflation and rising interest rates, the pace of recovery in retail spending may be sluggish. Moreover, the softening labour market and prolonged economic uncertainties are likely to further dampen consumer sentiment, posing challenges for retailers and businesses alike.
In conclusion, New Zealand’s retail sector is navigating through challenging times, marked by consecutive declines in spending and subdued consumer confidence. While certain non-retail sectors demonstrate resilience, the broader economic landscape remains uncertain. As policymakers and businesses strategize for the future, a nuanced understanding of evolving consumer behaviour and economic dynamics will be crucial in charting a path towards recovery and resilience.
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