Fuel spending down despite sharp price rises
New Zealand household spending declined sharply in April despite a surge in fuel prices, according to a Westpac IQ analysis published Tuesday.
Electronic card payment data showed retail spending fell 1.3% month on month in April, a result that Westpac senior economist Darren Gibbs described as “a much weaker outcome than we had expected.”
The drop reversed the 0.7% gain recorded in March and fell well short of Westpac’s own forecast of a 1.2% rise. On an annual basis, retail spending grew 2.0%, slowing from 2.7% the previous month.
Fuel spending was among the more striking findings. Petrol prices rose nearly 13% over the month, while diesel surged almost 37%, yet spending on fuel still fell 2.0% month on month. Gibbs attributed this to a pullback in purchase volumes following what appeared to be panic buying at the end of March, when fuel spending had jumped nearly 16%.
Vehicle spending also declined, falling 4.1% over the same period.
Core retail spending, which strips out fuel and vehicle purchases, mirrored the headline result, falling 1.3% after a 0.3% decline in March.
Spending dropped across all store types. Consumables recorded the steepest fall at 2.1%, reversing a 1.4% lift in March that may have been driven by households stocking up ahead of anticipated price increases or supply concerns. Hospitality and apparel each fell 1.3%, with apparel spending sitting below year-earlier levels for a second consecutive month. Durables declined 1.1%.
Looking ahead, the Westpac analysis noted that a pullback in retail fuel prices through May could offer some relief to households, though prices are expected to remain elevated relative to pre-conflict levels.
Weakness in the housing market may further dampen spending on durables. The analysis also flagged that softening global consumer confidence and rising travel costs could begin to weigh on tourist arrivals, which have helped sustain the hospitality sector during a period of subdued domestic demand.
Gibbs noted that the official retail sales survey, due Friday, would likely show a lift in spending volumes for the March quarter, in line with forecasts for a solid rise in GDP. However, Westpac continues to anticipate a slight decline in spending volumes in the current quarter, even as higher prices keep the dollar value of spending steady.
“What happens over the second half of the year and beyond will depend on how the Middle East conflict evolves and how the RBNZ responds to the near-term spike in inflation,” Gibbs said.
