Spending might still be tight
Retailers relying on pent-up demand after New Zealand’s Covid-19 lockdown ends might be hoping for too much.
Electronic card spending in March shows Kiwis spent $376 million more on groceries than they did in the previous month, an increase of 17 per cent.
But the opposite was true for travel (down 53 per cent), food and beverages (27 per cent) accommodation (down 32 per cent) and clothing (down 32 per cent).
Mark Smith, an ASB senior economist, said the 3.9 per cent fall in March’s overall retail spending was worse than expected, and high unemployment might curb shoppers’ impulses when retail returned.
‘‘Despite policymakers throwing in the kitchen sink to cushion the household sector, a retail spend-up after the end of the lockdown from pent-up demand may be muted as households remain cautious with an eye on the weaker economic prospects ahead.’’
Statistics New Zealand’s figures out on Thursday gave more detailed information about spending so that the impact of Covid-19 on consumer spending was easier to see.
It shows travel spending, usually part of a wider non-retail category, plunged by 53 per cent in March, its biggest fall on record. Overall card
spending, both retail and non-retail, was down 8.7 per cent compared with a 0.4 per cent rise in February.
On the retail side, sales totalled $5.7 billion, $231m or 3.9 per cent lower than February, and down 1.8 per cent on a year earlier.
The winners were grocers and supermarkets, up 17 per cent or $376m on February as shoppers stocked up for the lockdown.
But elsewhere, retail card spending fell across the board, from clothes to fuel. Excluding groceries, it was down 17 per cent in the month.
Hospitality spending fell 30 per cent or $338m, as border closures and later movement restrictions meant tourist numbers dried up.
Sales of clothes and shoes fell $98m, and furniture, hardware, and appliances (durables) sales were down $57m (3.9 per cent).
Fuel spending is also down, thanks to driving restrictions and a drop in fuel prices, falling $113m or 19 per cent in March. This is echoed in Z Energy’s weekly fuel updates, which show demand for 91 and 95 octane at its retail outlets have slumped from 15,185,786 litres in a normal week to just over 3 million litres last week.
Excluding vehicle-related industries, core retail spending dropped 1.5 per cent in March, more than reversing a 0.7 per cent rise the previous month.
ANZ senior economist Liz Kendall said spending will have plunged further since then.
‘‘Once Covid-19 restrictions start to be lifted, we are likely to see an initial bounce. But in trend terms, spending will remain weak for some time, with the recovery slow.’’
Kendall said returning to normal would not be straightforward.
‘‘We expect to see an initial bounce in retail spending on the back of pent-up demand, but it will return to a much lower trend overall.’’