New signs of spending slowdown
Consumers battened down the hatches in November as retail card spending was subdued, according to Stats NZ.
The data will be keenly watched by the Reserve Bank as it looks to tame rampant inflation through further OCR hikes.
Retail card spending rose $21 million (0.3 per cent) in November compared with October, when adjusted for seasonal effects, Stats NZ said yesterday.
The increase largely came from spending on consumables, up $16m (0.6 per cent).
Crucially, spending on durable items (such as furniture, hardware, and appliances) had the largest fall in November, down $18m (1.1 per cent).
However, that fall followed a large 2.9 per cent rise in October.
Seasonally adjusted total card spending fell in November for the first time in four months, down $38m (0.4 per cent).
Westpac senior economist Satish Ranchhod said yesterday’s report was “a glass half full” result for RBNZ.
“They still have a big task ahead of them,” he said.
“The lack of growth in durables spending may be an early sign that spending appetites are starting to soften.”
But Ranchhod noted demand was still running hotter than the RBNZ would like.
“Households may not be spending more on durables, but they haven’t really reduced their spending either. In addition, we are seeing a rotation in spending into other areas, like apparel and hospitality.”
ASB senior economist Mark Smith said the RBNZ’s warning around bringing down inflation looked to be hitting home.
But he said the central bank was still expected to press forward with OCR hikes.
He said ASB expected a further 125 basis points of hikes to the OCR, peaking at 5.5 per cent in mid-2023, and on par with RBNZ’s forecast last month.
“Weakness in household spending could see the RBNZ potentially scale back the 125bp of hikes it has signalled for early 2023, but the inflation outlook takes priority and the RBNZ is unlikely to wobble unless it is 110 per cent confident inflation will settle in the 1-3 per cent inflation target range.
“At this stage, the regret of the RBNZ from not following through with OCR hikes outweigh those from not getting on top of inflation and having to engineer a deeper downturn to align inflation and inflation expectations. OCR cuts beckon, but not until 2024.”
Last month the RBNZ forecast New Zealand would enter recession from mid2023.
In its last meeting for the year, the central bank lifted the OCR by 75 basis points, taking it to 4.25 per cent, its highest level since 2008.
The next time the monetary policy committee meets will be on February 22, 2023.
Smith said while November card spending data was a touch stronger than expected, the Black Friday bounce failed to emerge.
“Durable spending enjoyed a stellar run in 2021, but headwinds appear to be hitting home and we expect outright retrenchment of this sector and for broader discretionary spending over 2023.
“Our view remains that retail spending is unlikely to show the same vigour in 2022 as it did during a stellar 2021.
“There’s nothing like talk of a pending recession to instil restraint.”
He also said contraction looms for the household sector next year “as the impacts of sharply-rising debt servicing costs and elevated consumer prices hit home”.