Electronic card spending rose in July

Thursday 21st August 2008

New Zealanders increased their spending on credit and debit cards last month, suggesting a faint glimmer for consumer confidence after it plummeted to a 17-year low in the second quarter.

Core retail spending on electronic cards rose 1.2% in July from the previous month, Statistics New Zealand said. Spending fell 1.5% in June.

The spending figures come after the Roy Morgan fortnightly consumer confidence survey showed New Zealanders became less pessimistic about the outlook for the economy this month. The survey follows the central bank's decision to cut its official cash rate in July and signal more reductions to come.

"The outlook remains weak, but perhaps less bleak if improvement in consumer confidence over recent weeks is sustained," said Shamubeel Eaqub, analyst at Goldman Sachs JBWere.

Still, "the headwinds to the consumer remain intense on many fronts and a sustained recovery in retail spending is unlikely until late 2009," he said.

New Zealand's economy fell into recession in the first half, according to Treasury estimates. Economists say GDP is probably also weak this quarter.

Shares of Warehouse Group, the biggest retailer on the NZX 50, rose 2% to NZ$3.52. The company cut its full-year earnings forecast in June, citing "a marked downturn in consumer spending." The shares have tumbled 40% this year.

By Jonathan Underhill

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