South Island leads as Hawke’s Bay, Canterbury sales surge
New Zealand’s retailers ended 2025 on a stronger footing, with a broad-based lift in discretionary and durable goods spending pointing to improving household finances and a gradual recovery in demand.
Stats NZ data shows the total volume of retail sales rose 0.9% in the December 2025 quarter, adding $239 million in seasonally adjusted, inflation‑adjusted terms. Twelve of the 15 retail industries recorded higher sales volumes, led by categories more exposed to interest rates and confidence.
“Spending on discretionary items helped drive an overall increase in retail activity,” economic indicators spokesperson Michelle Feyen (pictured upper left) said. “Pharmaceutical and other store-based retailing, electrical and electronic goods, and hardware, building, and garden supplies saw the largest increases in activity this quarter.”
Discretionary and durable spending power the recovery
Economists say the latest figures confirm that the retail upturn, now into its fifth consecutive quarter, is being powered by non‑essential purchases as lower interest rates filter through.
Westpac senior economist Satish Ranchhod (pictured upper right) noted that nominal retail sales rose 1.4% in the quarter and 4.9% over the year, with volumes up 4.4% annually and outperforming expectations.
“This is the fifth quarter in a row that we’ve seen a solid rise in retail spending. That corresponds to the period over which the RBNZ was cutting the OCR,” he said in a Westpac analysis, pointing to robust gains in electronics, furniture, hardware, recreational goods, and clothing.
While vehicle and grocery spending dipped, Ranchhod suggested some of that reflects a shift towards dining out and hospitality, alongside increased tourist activity.
In an ASB commentary, economists Yen Nguyen and Mark Smith (pictured lower left to right) also highlighted the strength of core and discretionary categories, saying “the recovery in durables spending over the past year, strongly demonstrates the supportive impact of lower interest rates on the household sector despite a ho-hum house price backdrop.”
Regions share in retail upturn as tourism helps
Regionally, 12 of 16 areas saw higher sales values over the quarter. Hawke’s Bay and Canterbury posted the strongest percentage gains, while South Island spending climbed 2.3% to $7.9 billion and North Island sales rose 1.5% to $23 billion.
ASB noted that the rebound has been more pronounced in the South Island, where inbound tourism and firm commodity export earnings are supporting spending in centres such as Otago, Northland, Southland, and Waikato.
Gradual 2026 outlook but headwinds remain for retailers
Nguyen and Smith said the stronger‑than‑expected Q4 numbers likely added 0.1–0.2 percentage points to GDP growth, and expect the retail recovery to “continue gradually, with a more pronounced improvement anticipated in the second half of the year, driven by lower borrowing costs and a broadening economic recovery.”
Even so, bank economists cautioned that not all retailers are benefitting equally. Many households are still looking for value, with some discretionary spending flowing to low‑cost online and offshore platforms. Combined with a “ho-hum” housing backdrop, soft population growth, and ongoing cost‑of‑living pressures, trading conditions remain challenging for parts of the sector, particularly bricks‑and‑mortar apparel and department stores.
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