Consumers spend more, but embrace prudence too

JAMES WEIR
Last updated 05:00 12/06/2014

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Shop spending is bouncing back strongly after a weak patch earlier in the year, but economists say people are living within their means.

Shoppers spent 1.3 per cent more in May and the gains were across the board for all retail sectors, according to Statistics NZ figures for electronic card spending out yesterday.

Core retail spending, excluding cars and fuel, was up 6.9 per cent on May last year.

With a better job market, people are spending more on eating out and food and drinks to have at home. And they swallowed higher petrol prices last month too.

Spending in the hospitality sector has been a standout in the past year, with sales up amost 13 per cent on May last year, in a sign of greater confidence about the job market and a willingness to splash out beyond the essentials.

In March, retail sales were flat, and rose just 0.4 per cent in April, with the lull reflecting mild autumn weather slowing clothes sales and the impact of the Easter and Anzac day holidays falling close together.

The lift in May was stronger than the 0.5 per cent May growth that most economists expected. That reflected continued optimism among households, ASB Bank economists said. The improving job market is likely to see further gains in consumer spending in coming months, ASB said.

ANZ Bank senior economist Mark Smith said there was a solid trend for retail spending which was broadly in line with lifting labour incomes.

"It suggests that consumers are living within their means and are not getting carried too away, which augurs well for the durability of the upturn," he said.

Infometrics said total retail sales appeared to be rising in line with household incomes and should stay tied to income growth in the next couple of years.

Households would remain wary of borrowing too much more after many years of uncertainty about the economy and jobs, Infometrics said.

Average household debt remains high at more than 145 per cent of disposable income, but is down on a year ago and below levels of 153 per cent in 2009.

The retail sales figures came out just a day ahead of today's widely expected rise in official interest rates by the Reserve Bank, from 3 per cent to 3.25 per cent.

ANZ said robust domestic demand warranted a rate rise and there was a "reasonable chance" rates would rise again in July.

MAY CARD SALES

Retail related sales: up 1.3 per cent, seasonally adjusted (up 0.4 per cent in April) up 6.4 per cent on May last year

Core retail sales (excluding cars and fuel) up 1 per cent (up 0.2 per cent in April)

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Key spending drivers in May

Fuel: up 2.8 per cent ($21 million)

Consumables, food and liquor: up 1.1 per cent ($18 million).

Hospitality: up 1.5 per cent ($11 million)

May transactions: 121 million

Average value: $51.

Total spending:$6.2 billion.

Source: Statistics NZ

- Stuff

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