Retail, hospitality face a hit: economist

AUCKLAND: The sudden move to Alert Level 3 in Auckland is expected to have a ripple negative effect on retail spending across the country — but the question is: for how long?

Economists are predicting a sharp drop in spending this week, in categories outside of consumables, as consumers tighten their purse strings amid uncertainty about a potential widespread community outbreak of Covid19.

Retail spending fell 0.4% in January, though remained up 1.9% on the same time last year, according to the latest figures from Stats NZ.

Core spending excluding vehicles and fuel, however, fell 0.7% in January, and that followed declines of 0.6% and 0.9% in November and December respectively.

Data released last week shows spending in the retail industries fell by $24 million in January compared with December.

Economists forecast spending will fall further this month in response to the country’s latest upgrade in Covid19 restrictions and remain cautious.

ASB senior economist Jane Turner said there was no doubt spending would stall this week as a result of upgraded restrictions, but just how long this would continue was unknown.

‘‘We are going to see a bit of a fall in February. How big that fall will be will depend on how long the lockdown will go for. There were a few headwinds facing the retail sector prior to this; [stalled] population growth because of the cap on immigration and the impact of tourism activity from foreign tourists,’’ Ms Turner said.

Like previous lockdowns that affected Auckland — which accounts for 38% of the New Zealand economy — spending stalled, but it was not lost.

Ms Turner said it was put off to a later date; the economy had experienced a spending splurge in the months following last year’s Covid19 restrictions.

She expected the same thing would happen again this time.

‘‘What we’ve seen from the past lockdowns is that a lot of spending is typically deferred so we do see a decline but often there is a strong catchup in the next month or whenever the lockdown is lifted.’’

While retail spending on durables and larger ticket items was expected to be caught up once restrictions were lifted, the spend that would have gone on hospitality was lost. — The New Zealand Herald