Retail spending on debit, credit cards rises 0.8% on fuel tax boost

Tuesday 9th November 2010

New Zealand consumers lifted purchases on their debit and credit cards last month, though the gains may largely reflect an increase in fuel excise rather than a revival for retailers.

Electronic card transactions at retailers rose 0.8% in October, after climbing 1.7% in the previous month, according to Statistics New Zealand. Excluding spending on fuel and auto-related industries, transactions were unchanged.

The monthly figures may highlight continued weakness in consumer spending as they capture the first month of GST at 15%. The electronic card data is a useful indicator of consumer spending because it makes up about two-thirds of spending.

“Given the value of card transactions includes the increase in GST that occurred at the beginning of October, retail spending over the month appears to have been quite subdued,” said Christina Leung, economist at ASB.

“Today’s result suggests some unwinding of the increase in retail spending that occurred in September,” she said. “Overall, the recovery in household spending is continuing at a gradual pace.”

Leung said the GST hike have translated to a 2.02% increase in prices if retailers had chosen to pass on all of the costs

“Anecdotes have been mixed as to whether that had been the case in October, with some retailers using the GST increase as a chance to do an overall review of prices while others chose to absorb the GST increase into their margins,” she said.

Consumer spending has been a concern for the Reserve Bank as households focus on repaying debt and increasing savings, which has kept the economic recovery subdued and retailers under pressure. Last week, homeware and sporting goods retailer Briscoe Group said its performance was still patchy, even though its third-quarter sales bounced back from a soft second quarter.

Central bank Governor Alan Bollard isn’t expecting normal spending habits to return until confidence returns, the labour market picks up, and primary producers finish deleveraging and capitalise on surging commodity prices.

Businesswire.co.nz

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