Shoppers curtail spending in February

Consumers are keeping their wallets on a tight leash with a subdued recovery in household spending, which is more gradual than economists had expected after last year's recession.

Retail sales using electronic cards remained weak in February, dipping during the month, Statistics New Zealand figures show. The seasonally adjusted values of core retail, retail, and total transactions all eased in February 2010 for electronic cards, such as eftpos debit cards, credit and charge cards.

Shoppers spent less on big ticket durables like furniture and appliances, plus clothing. People spent more on food in the month, but it remained unclear if that was the result of rising food prices in the month, with food inflation figures not due out until tomorrow.

In January, food prices rose 2.1 per cent.

February kicked off with the announcement that unemployment had jumped up to 7.3 per cent which may have people more cautious about spending.

Economists said the present subdued retail spending might pick up gradually later this year, as the broader economic recovery started to lead to more jobs. There might also be a small spending burst, before an expected increase in GST to 15 per cent in October.

In the meantime, Deutsche Bank economists said the spending recovery could be put at risk if consumer confidence fell because of the weak housing market, and flat or falling house prices, as people saved rather than borrowed to spend.

In January, credit card billings eased 0.2 per cent on the same month last year.

ASB bank economists said the recent trend in electronic card transactions in the past few months suggested the recovery in household spending "remains very gradual".

Statistics NZ said core retail spending, excluding car-related sectors, was flat, down just 0.2 per cent, compared with January 2010. The decrease reflected flat or falling sales in all the core retail industries, except day-to-day products such as food, alcohol and chemist store products. Core retail, including car-related sectors, also fell 0.2 per cent in January 2010.

Total transactions in the retail industries fell 0.4 per cent in February 2010, reversing January's increase.

Fuel retailing declined 1.3 per cent, after being the main contributor to increases in the retail series from August 2009 to January 2010.

Petrol prices rose 7c a litre in total during January, and did not move in February.

- © Fairfax NZ News