Praneeta Mahajan
Hamilton, January 19, 2024
Card spending fell sharply in December 2023, taking the fizzle out of the Christmas season, a time of the year when retail activity is expected to be busier than usual. Falls were recorded across most categories over the month, in addition to a widespread decline on a quarterly basis, according to a report issued by ASB Bank.
What the numbers say
According to Stats NZ, The total value of electronic card spending in the December 2023 quarter, including the two non-retail categories (services and other non-retail) decreased by $32 million (0.1%), compared with the September 2023 quarter.
Year on year, hospitality was the only sector that showed a positive movement and was up $77 million (2.0%) compared with the December 2022 quarter.
According to the report, Total retail card spending fell 2.0% (month on month) in December, after a brief jump in November. On an annual basis, total retail card spending was 0.6% lower than in December 2022, which highlights just how challenging 2023 was for the retail sector, despite record-high population growth.
Core spending falls
A 5% decline in fuel prices in the month added to the overall fall in total sales, but falls were recorded across every category except hospitality in December as per the ASB report.
Core card spending also fell 2.0% over the month. Apparel spending fell almost 3.0% month on month, nearly reversing November’s +4.5% jump.
Durables spending in December fell 2.1% month on month and is now 4.4% lower than in December 2022.
By spending category, the movement noted by Stats NZ was durables being down $319 million (6.3%), fuel was down $68 million (3.9%), consumables were down $51 million (0.6%), apparel was down $32 million (3.1%). The non-retail (excluding services) category was up $45 million (0.7%) and the services category was down $21 million (2.0%).
Population growth
Consumables, an area that has been more obviously benefiting from population growth, also fell in December to be up only 2.5% year on year.
This annual growth is low in the context of record-high population growth and 5% inflation. Non-retail spending remains the ‘odd one out’ with sales up 1.1% in a month-on-month comparison. Non-retail spending includes medical and other healthcare, travel and tour arrangements, postal and courier delivery. Strong population growth is likely also playing a role here, but the sector is also being underpinned by a strong and lingering demand for travel services post-COVID.
A sharp contrast
The recently released retail spending data contrasted sharply with the optimism shown by retailers in the fourth quarter forecasts issued earlier. The report stated, “Households’ budgets have been significantly impacted by rising debt servicing costs and broad cost of living pressures. A lift in the unemployment rate in late 2023 will have done little to help consumers’ willingness to spend.”
A spokesperson from ASB said, “Strong population growth remains the key support to retail spending but has so far been unable to offset the impact of significantly trimmed household budgets. We do not expect these challenges to subside for some time either.”
Substantial mortgage relief appears to be some way off and a further weakening in the labour market is likely to be an additional headwind to the retail sector over 2024.
“Ongoing subdued demand is consistent with our view that the Official Cash Rate has peaked and that the next move will be lower, in August on our forecast. However, there are still some lingering upside risks to the inflation outlook and the RBNZ’s determination to make sure inflation falls back to around the mid-point of the inflation target suggests that the RBNZ will not decide to ease monetary policy lightly,” stated the report.
Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.
