Sharp lift in spending at the pump

RECORD high petrol prices helped lift credit and debit card spending on fuel by $39 million in July, up more than 5 per cent.

But the high petrol prices and a slower housing market are weighing down spending on other items, like furniture, hardware and appliances.

Statistics New Zealand figures out yesterday showed higher spending on fuel was a key driver of a 0.4 per cent lift in the value of total retail sales in the month.

It was the third month in a row where Statistics NZ reported large rises in spending on fuel.

Economists said the fuel spending figures suggested volumes may have also risen, despite petrol hitting a record $2.27 a litre. Fuel spending is up more than 8 per cent in the past three months.

Because people need to drive, consumers don’t tend to cut back much on how far they drive as prices rise. Rather, they spend less on other things.

The Statistics NZ figures also showed spending on durable goods, like furniture and appliances, fell $15m or 1.4 per cent, while clothing sales slipped $10m or 3.3 per cent.

Core retail spending, excluding cars and fuel, was actually down 0.7 per cent in July.

Infometrics economists said higher fuel prices, and consumers still being cautious about borrowing, had seen sales slip in the month.

New car and commercial vehicle sales are booming but that rise is not likely to be captured in credit and debit card figures.

ANZ Bank economists said that rising fuel prices may be starting to weigh on wider retail spending.

The moderate trend for core retail spending and a lack of inflation, with a still high New Zealand dollar holding down import prices, means the Reserve Bank is not expected to lift official interest rates this year.

But ANZ said the Reserve Bank was still keeping a close watch on the housing market, credit growth and consumer spending.