Discretionary spending jumps as households regain confidence
Card spending rose 1.2% in November, likely supported by improving household finances and the growing prevalence of Black Friday sales, according to recent analyses from Westpac and the ASB Bank.
The November figure exceeded Westpac’s forecast of 0.6% and followed an unrevised 0.2% increase in October, bringing annual growth to 1.6%. Core retail spending, which excludes fuel, rose 1.1% monthly and 2.1% annually.
“The strong lift in November was broad-based across sectors,” ASB economists noted in the report. Durables increased 2.1% monthly, and apparel surged 3.4% monthly, likely benefiting from expanding Black Friday promotions, analysts said.
Services and hospitality rebound
Services spending stood out with a 2.8% monthly increase after relatively flat performance throughout 2025, Hospitality spending rose 1.3% in November, rebounding from a similar-sized decline in October.
“The strength in services, apparel, and durables spending points to a recovery in discretionary spending taking place toward the end of 2025,” ASB economists said.
Consumables posted more modest growth of 0.4% monthly but maintained the strongest annual increase at 4.0%, reflecting significant food price rises over the past year, Westpac noted. By comparison, durables spending rose just 0.8% annually, where heavy discounting has occurred.
Westpac senior economist Darren Gibbs said retail spending outcomes have been volatile around the year-end in recent years.
“We (and the RBNZ) should have a good idea of underlying consumer spending momentum by the time the January 2026 card spending report is released, just a couple of days before the RBNZ’s next OCR decision on 18 February,” Gibbs said.
Factors behind recovery
Both banks attributed the recovery to multiple factors. The average paid mortgage rate continues to decline by approximately 10 basis points monthly as mortgage holders refinance, according to Westpac. The labour market appears to be transitioning from stabilisation to positive job growth.
“With the labour market poised for recovery and household discretionary funds freed up as borrowers refix at lower mortgage rates, the economic recovery looks to be finding some self-sustaining momentum,” ASB economists said.
Tourist spending has also been attributed for growth, particularly in hospitality. Short-term visitor numbers have increased recently, supported by rising Australian arrivals and a weak New Zealand dollar, which enhances tourists’ purchasing power, ASB reported.
Outlook
Looking ahead, Westpac expects conditions in the retail sector to continue improving gradually during 2026 following a difficult post-pandemic trading environment.
ASB economists indicated that recent data confirms a more self-sustaining economic recovery is forming.
“Recent economic data has confirmed a more self-sustaining economic recovery is forming and that, barring any further economic shocks, additional cuts to the Official Cash Rate are not likely to be needed over the coming year,” Turner said.
ASB expects the Reserve Bank of New Zealand to maintain the OCR at 2.25% for the foreseeable future.
