NZ trimmed credit card balances to six-month low in December

Monday 26th January 2009

New Zealanders trimmed their credit card balances in December, the first time in at least four years that the amount owing has slipped in what is typically a peak month for retail spending.

The amount owed on credit cards fell 0.8%, seasonally adjusted, to NZ$5.23 billion last month, according to credit card statistics posted on the Reserve Bank's website today.
Advances outstanding fell to the lowest since July, in only the second month-on-month drop since at least June 2005, according to central bank data. The other instance of a decline was 0.1% in October last year.

Government figures last week showed consumer spending on credit and debit cards fell in December, after a record drop in the previous month, reflecting a decline in the value of fuel purchases. Card spending dropped 0.5 percent from November, according to Statistics New Zealand, though excluding auto and fuel-related purchases, sales gained 0.2% in the latest month.

The card statistics give an early indicator of retail spending, which was unexpectedly unchanged in November, amid predictions of a decline. The Bank of New Zealand - Business NZ Performance of Services Index (PSI) gained to 48 last month from 47.3 in November, indicating the ninth straight month of contraction, according to a statement today.

"While December's 'improvement' is welcome, the underlying story is still much weaker than the headline suggests," Walton said.

The December 2008 reading is down from 53.9 for the same month a year earlier, which suggests "a slowdown much more in keeping with the recessionary backdrop currently in place."

The economy fell into its first recession in a decade last year and some economists predict GDP will shrink for five quarters before reviving. The central bank is expected to slash the official cash rate by 100 basis points to 4% on Thursday and some economists expect further cuts taking the OCR to 3% by mid-year.

The average interest rate paid on credit cards slipped back to 19.7% last month, the lowest since February last year, according to central bank figures.

By Jonathan Underhill

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