Retail spending rises, but households remain budget cautious
New Zealand card spending rose again in August, suggesting signs of economic recovery, though annual figures still point to weak consumer demand.
Economists say this improvement could signal a rebound in Q3 GDP and set the stage for further RBNZ easing.
Spending trends show modest gains
ASB economist Yen Nguyen (pictured left) said total card spending increased by 0.4% month-on-month in August, slightly below July’s 0.6% rise but marking the second straight month of gains.
“These results reinforce our view of a recovery in card spending, albeit at a slower pace than initially projected,” Nguyen said.
Retail card spending rose 0.7% and core retail spending (excluding fuel) climbed 0.9%, both stronger than July. However, Nguyen noted that annual growth remained subdued, with total retail spending just 0.9% higher than a year ago and core retail spending up 1.7%.
“When adjusted for inflation, which is expected to reach 3% annually in the September quarter, card spending growth remains anaemic,” she said.
Hospitality and apparel lead the way
The details showed improvement across most categories. Hospitality spending rose 1.4% – the second monthly increase – while apparel spending reversed July’s decline with a 1.8% gain. Durables spending also lifted 0.5% after falling in July.
“Consumables spending registered the third consecutive monthly gain, up by 0.3%, likely reflecting food price increases,” Nguyen said.
Non-retail sector spending slowed to 0.2%, services spending was flat, and vehicle spending fell 0.9% following a sharp July rebound. Fuel spending edged lower by 0.1%.
Signs of stronger momentum ahead
Westpac senior economist Darren Gibbs (pictured right) said August’s retail spending outcome was firmer than expected.
“Stats NZ’s Electronic Card Transactions Survey recorded a 0.7% lift in spending in retail stores in August – a firmer outcome than we had expected. Encouragingly, this marks the third consecutive monthly increase and is the largest increase seen this year,” Gibbs said.
He added that spending in the three months to August was 0.8% higher than in the previous three-month period – the first positive quarterly comparison since February.
“This improving trend bodes well for September quarter GDP, especially after what we expect will be a disappointing June quarter print next week,” Gibbs said.
Hospitality spending lifted 1.4%, apparel rose 1.8%, and durables also posted gains. Fuel, however, continued its downward trend with an eighth straight monthly fall.
Outlook: More OCR cuts expected
Nguyen said policy support would remain crucial to sustaining the recovery.
“We are particularly heartened by the August lift in spending, which points to a Q3 rebound in NZ economic activity after a subdued Q2 period,” she said. “We have pencilled in a 25bp OCR cut at each meeting by year-end, bringing the OCR to 2.5%.”
Gibbs agreed that consumer spending was likely to remain patchy in the near term but expected conditions to improve as policy easing feeds through.
“For many retailers, business conditions will remain tough at the moment, albeit with signs of some improvement in train,” he said. “Looking further ahead, we expect that the environment facing retailers will improve noticeably in 2026.”
For mortgage advisers, these spending figures highlight improving economic momentum, but also show household caution — a dynamic that could influence demand for refinancing and new lending.
More information can be found on the ASB and Westpac analysis.
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