Retail spending rose 2% in July as fuel prices eased and the World Cup boosted hospitality
New Zealand retail spending picked up meaningfully in July after trending sideways for most of the year, with Westpac data showing per-person spending on its issued credit and debit cards rising 2% over the month.
Cheaper fuel and a World Cup boost drove the lift
Falling fuel prices helped underpin July's improvement, with 91-unleaded averaging $2.96 a litre over the month, down from more than $3.11 in June, while diesel prices fell by around 30 cents a litre.
Grocery spending rose nearly 3%, and utilities spending lifted 2%, partly reflecting the past year's steep rise in electricity prices.
Discretionary spending also strengthened, with restaurant spending up 5% and other entertainment spending up 2%, a lift Westpac linked to the FIFA World Cup, with hospitality spending climbing on days when major matches were played compared with the same time last year.
July also saw increased spending on sports betting and Lotto tickets, driven in part by a large Powerball jackpot.
Westpac senior economist Satish Ranchhod, the report's author, noted with some candour that his own luck hadn't extended to the draw itself.
"I obviously did not win Powerball, hence I am still writing these reports," Ranchhod wrote.
Fuel costs remain a drag despite recent falls
Even with July's improvement, fuel prices remain well above pre-conflict levels, with 91-unleaded averaging $3.05 a litre nationally at time of writing, compared with around $2.44 back in February.
Westpac said sustained high prices had reshaped household spending habits, with 36% of households surveyed saying they'd wound back discretionary spending and around 15% delaying or cancelling travel plans. Roughly 30% said they'd changed how they shop for groceries, buying fewer or cheaper items.
Westpac expects spending to rise only gradually through the rest of the year given ongoing cost-of-living pressure and continued economic uncertainty. That caution is reinforced by a softening labour market — unemployment climbed to an 11-year high of 5.6% in the June quarter, with wage growth stuck at 2% against 4.1% inflation — and the RBNZ's own tightening cycle, which began last month with the OCR lifting to 2.5% — its first hike in three years.
Regional spending diverges along commodity lines
Spending growth remains uneven across the country. Regions with strong dairying sectors, including Southland, Otago and Canterbury, posted some of the largest increases, while strength in horticultural export prices, such as apples and kiwifruit, supported spending in Bay of Plenty. Southland recorded the strongest annual growth nationally at 11.3%, while Auckland and Wellington continued to lag the rest of the country, consistent with softer conditions in their labour markets.
For the full Westpac report, click here.
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