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Electronic card transactions climb for third month

Wednesday 10th February 2010

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New Zealand consumer spending on credit and debit cards rose for a third straight month in January, helped by purchases at petrol stations, underlining the economy’s slow recovery from its slump.

The value of transactions on electronic cards at retailers rose 0.5% last month from December, when they climbed 0.7%, according to Statistics New Zealand. Excluding spending at motor vehicle-related industries, transactions at core retailers fell 0.1%.

Stripping out auto industries shows retailing’s recovery is somewhat patchy. Consumer enthusiasm for spending is being tempered by a still-weak housing market, evidenced by Reserve Bank Governor Alan Bollard’s view that a return to property boom conditions hasn’t eventuated.

Warehouse Group said last month that it didn’t see the Christmas pick up it had hoped for, while rival Briscoe Group said annual profit almost doubled after strong Christmas trading fattened its margins.

“Today’s numbers are again consistent with a stabilisation in consumer spending, but also an ongoing cautiousness from consumers,” said Philip Borkin, economist at Goldman Sachs JBWere. Recent data points to “a reasonably sluggish cyclical recovery,” he said.

Borkin expects an improvement in consumer spending in the first half of 2010 but “the pace of recovery will need to pick-up from today’s rates if real household spending is to meet our forecasts.”

Spending on credit cards may increase as more kiwis rely on credit to pay for expenses they couldn’t otherwise afford, according to Dun & Bradstreet’s Consumer Credit Expectations Survey, released today.

The electronic card figures come a month before the government statistician releases its official measure of retail sales. While it cautions that the card data shouldn’t be taken as an exhaustive measure of retailing, economists regard it as a useful leading indicator.

Retail sales probably rose 0.5% in December and retail volumes rose 1.4% in the fourth quarter, according to a Reuters survey. The retail report is due out on February 12.

Fuel retailing was the biggest contributor to increased card spending for a second month, rising 2.6% for an annual increase of 15%.

The number of card transactions in January rose 4.7% from a year earlier to 81 million.

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