23 Aug 2023

Retail spending continues to fall as economy contracts

5:05 pm on 23 August 2023
Auckland pedestrians queen street generic

New Zealanders are spending less in retail. Photo: 123RF

Retail spending has slumped for the third consecutive quarter as the country faces a consumption recession.

The total volume of retail sales fell 1 percent in the June quarter, on top of declines in the previous two quarters, according to Stats NZ.

Weak activity in the sector was broad-based with 11 of the 15 retail industries showing lower volumes, while motor vehicle sales had the largest rise, up 3.7 percent.

Food and beverage services spending was down 4.4 percent, liquor fell 2 percent, while supermarket and grocery store spending declined 0.6 percent.

A pullback in discretionary sectors was evident with hardware, building and garden supplies, recreational goods and clothing, footwear and personal accessories all falling around 5 percent.

ASB senior economist Kim Mundy said core volumes slumped by 1.8 percent and the outlook remains bleak.

"Those headwinds facing the sector aren't likely to dissipate any time soon.

"In fact some of the support to the sector at the start of the year, a decent amount of savings left over from Covid, nominal wages growth was relatively high, and also that we had that surging population growth to start the year - those are all fading."

Mundy said weak consumer demand was consistent with ASB's view that the Reserve Bank had done enough to bring inflation back to the target by the end of next year.

"We are seeing that people are cutting back on their spending and it is just a reflection of the environment that we are in."

She said 2023 was shaping up to be a very challenging year for the sector as high interest rates and rising costs hit consumers in the wallet.

"It's going to be an even harder slog for the sector over the remainder of the year."

Excluding the period of the Covid-19 lockdown, consumer spending is at its lowest level in four years.

Get the RNZ app

for ad-free news and current affairs