August pullback in retail spending points to a slow 2027 recovery
Rising fuel prices and higher mortgage rates are combining to weigh on New Zealand households, with new Stats NZ data showing retail card spending fell sharply in August, retracing much of July's gain.
Fuel costs and mortgage rates add to the squeeze
Economists at ASB and Westpac point to the same headwinds building into spring.
The RBNZ has lifted the OCR twice since July, pushing term mortgage rates higher, while escalating tensions in the Middle East have driven oil prices up – a particular risk given how sensitive card spending has proven to fuel costs.
ASB economist Yen Nguyen (pictured left) said the combination of pressures means the sector's recovery is unlikely to gain real traction soon, noting "the recovery of consumer spending is likely a 2027 story."
Spending retreats after July's rebound
Total electronic card transactions fell 0.5% in August, with retail spending down 0.9% and core retail (excluding fuel and vehicles) down 1%, according to Statistics NZ data.
Westpac noted a similar retail decline of 0.9%, a much larger fall than the 0.2% drop it had forecast, with core retail spending also down 1%. Annual growth in both measures has now dragged back to near zero.
The pullback was broad-based. Apparel spending fell 2% over the month, hospitality dropped 1.7% and durable goods fell 1.6%, reversing much of the discretionary spending boost seen in July from the Football World Cup and Matariki sales. Vehicle spending fell a further 0.3%. Fuel was the exception, rising 1.3% as pump prices pushed back above $3 a litre – its first monthly increase in four months.
That pattern of broad-based weakness is consistent with what Westpac senior economist Satish Ranchhod (pictured right) has been tracking for some time: "there is a lack of momentum in household spending", with elevated living costs and a soft labour market continuing to weigh on discretionary categories.
Outlook
Neither bank expects a rapid turnaround. ASB anticipates card spending will stay moderate through the rest of 2026 before more meaningful growth builds next year as headwinds ease, while Westpac expects spending growth to pick up as the labour market improves and inflation eases, though the near-term path is likely to remain gradual.
For advisers, the data points to continued caution among borrowers already adjusting to higher mortgage costs, with little sign of a near-term lift in discretionary household spending.
For more insights, read the Stats NZ release and the ASB and Westpac commentaries.
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