New Zealand shoppers finally shifted in July, and it took a football tournament on the other side of the world and a few weeks of cheaper petrol to make it happen.
Westpac’s latest Retail Spending Pulse, published on Tuesday, found per-person spending on the bank’s credit and debit cards rose 2 percent over the month. That is a modest number in isolation, but it is the first clear move in either direction since the start of the year.
“After trending sideways for most of this year, spending levels took a step higher in July, with per-person spending on Westpac issued credit and debit cards rising 2% over the month,” the bank’s senior economist Satish Ranchhod wrote.
Two things did most of the work. The first was the price of fuel, which came down over the month after a punishing first half of the year. “The price of 91-unleaded averaged $2.96/ltr over July, down from over $3.11/ltr in June. We also saw the average price of diesel falling by around 30c/ltr,” Ranchhod wrote. Money not spent at the pump has to go somewhere, and in July a good deal of it went into groceries, where spending rose nearly 3 percent.
The second was the FIFA World Cup, played in North America across June and July, which put a lot of New Zealanders in front of screens at odd hours and, it turns out, in front of a good many restaurant tables as well. Spending in restaurants rose 5 percent over the month and spending on other entertainment rose 2 percent. “That lift in entertainment spending coincided with the FIFA World Cup, with hospitality spending taking a step higher on days when major matches were played (compared to the same time last year),” Ranchhod wrote.
July also brought a lift in sports betting and a rush on Lotto tickets, the latter driven by a $40 million Powerball jackpot split between two winning tickets. None of that is the sort of thing an economy can count on twice. The other category to move was utilities, up 2 percent, which is less a sign of confidence than of the power bill. Ranchhod put the lift down in part to “the large increases in electricity prices over the past year”.
Underneath the improvement, the fuel story has not gone away. Petrol is cheaper than it was in June but nowhere near where it started the year, and Ranchhod said high prices had “sucked a large amount of cash out of many households’ wallets”.
“While fuel prices have fallen from their earlier highs, they remain well above the levels that we saw prior to the war in the Middle East. At the time of writing, 91-unleaded was averaging $3.05/ltr around the country, compared to around $2.44/ltr back in February,” he told interest.co.nz. That is a rise of about 25 percent in five months on a purchase most households cannot avoid, and it lines up with the official numbers. Petrol prices were up 27.5 percent in the year to the June quarter and diesel up 71 percent, making fuel the single largest contributor to annual inflation of 4.1 percent. We have looked at where today’s pump price sits against the past two decades once inflation is stripped out in our long-run look at the real price of petrol.
Households have responded by cutting elsewhere. Of the households Westpac surveyed for the report, 36 percent said they had wound back discretionary spending because of fuel costs, 15 percent had delayed or cancelled travel plans, and 44 percent said they were simply driving less often.
Even the grocery lift comes with an asterisk. “Even when it comes to spending on essentials like groceries, around 30% of those we spoke to said they’ve changed how they shop, purchasing fewer or cheaper items,” Ranchhod said. A 3 percent rise in grocery spending against food prices that have been climbing is not the same as three percent more food.
The more striking finding is where the money is being spent. Auckland and Wellington, which between them account for roughly half the country’s retail turnover, are trailing everywhere else. On a seasonally adjusted monthly basis, spending in Auckland rose 1.6 percent in July and in Wellington 1.7 percent, barely ahead of the weakest regions, Gisborne and Hawke’s Bay on 1 percent and Northland on 1.5 percent. Southland led the country at 3.8 percent, with Otago at 2.9 percent.
Ranchhod pointed to the export sector as the reason. Regions with large dairying industries, among them Southland, Otago and Canterbury, have been buoyed by strong commodity prices feeding into farm earnings, confidence and spending in provincial centres. “We’ve also seen strength in the prices for key horticultural exports (like apples and kiwifruit), which is helping to boost spending in regions like Bay of Plenty,” he said.
Over a full year the gap is wider still, and it is worth setting those figures against inflation rather than reading them raw. Annual spending growth was highest in Southland at 11.3 percent and Northland at 9.5 percent, while Auckland and Waikato came in at 7.2 percent and Wellington was last at 6.7 percent. With consumer prices up 4.1 percent over the same period, Southland’s growth sits more than seven points clear of inflation while Wellington’s clears it by about two and a half. In other words the provinces are genuinely spending more, and the two big cities are close to running on the spot once price rises are accounted for.
That divide is not hard to explain. Wellington has been absorbing public sector job losses for two years, Auckland carries the largest share of the country’s mortgage debt, and neither city gets much direct benefit from a good milk price or a strong apple season. The recovery, such as it is, is arriving from the paddock rather than the office tower. Nor is the labour market offering much help. Unemployment rose to 5.6 percent in the June quarter, the highest in more than a decade and above what the Reserve Bank and most bank economists had picked. Westpac is not expecting the July bounce to turn into a trend.
“With continued cost of living pressures, a soft labour market and ongoing economic uncertainty, we expect spending levels are likely to rise only gradually through the back part of the year,” Ranchhod said.
Two data releases over the next fortnight will show whether July was a genuine turn or a calendar quirk. Statistics NZ publishes its Selected Price Indexes for July next week, which will confirm what happened to petrol and diesel prices over the month, and its own electronic card transactions figures for July are due in the middle of August. Westpac’s numbers cover only its own cardholders, so the official series is the better test.
The honest reading of July is that retail got a holiday rather than a recovery. A one-off sporting event, a lottery jackpot and a temporary easing at the pump lifted the numbers for four weeks. Take those three away and the underlying picture is a country where nearly a third of shoppers have changed how they buy their groceries and almost half are driving less to make the budget work.
Has your household spending changed this year, and did the World Cup get you out of the house? Tell us in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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