Dining and entertainment rebound even as essentials bite harder
Retail spending has kicked off the Year of the Horse in solid shape, with new card data showing households are opening their wallets again despite ongoing cost pressures.
Spending on debit and credit cards issued by Westpac rose 0.7% in February after seasonal adjustment, following strong holiday gains. On a per-person basis, card outlays are now 6.6% higher than a year ago.
Westpac’s Satish Ranchhod (pictured), senior economist, said that “spending levels have taken a sizeable step higher since late last year, with falls in interest rates helping to boost many households’ disposable incomes.”
Firm commodity prices are also supporting rural regions. The report points to “continued firmness in commodity export prices, which has helped to boost earnings and confidence in many rural regions,” with Southland, Otago and Canterbury singled out as standout performers thanks to strong dairying sectors.
Essentials bite, but Kiwis still splash on dining and entertainment
The spending pulse highlights a familiar squeeze on household budgets. Food prices are up 4.6% over the year, while electricity costs have climbed an “eye-watering 12%” – pushing more money into essential categories and leaving less room for extras.
Yet discretionary spending has also rebounded since late 2025, with “particularly large increases in spending on dining out and other entertainment activities.”
In contrast, clothing remains a weak spot as “an increasing number of apparel purchases” shift to low-cost offshore and online retailers, intensifying pressure on domestic chains. Appliance and furniture sales also cooled in February after strong summer holiday demand.
Recovery builds, but risks could keep growth gradual
Rate cuts and export strength are underpinning a broader turnaround. The bank links the lift in spending to last year’s sharp falls in the official cash rate and cheaper mortgages, noting that “average household borrowing costs are set to continue dropping as borrowers roll off the higher fixed mortgage rates that were on offer in recent years and on to lower ones.”
One‑year fixed mortgage rates are about 70 basis points lower than a year ago, and two‑year rates roughly 200 basis points lower than in 2024.
NZIER’s latest Quarterly Predictions echo that the “long‑awaited recovery” is finally gaining traction as demand improves, helped by earlier OCR cuts and stronger exports, but caution that election uncertainty and global geopolitical tensions could slow the upturn.
Even so, Westpac warns the consumer recovery “could be gradual, especially in the near term.”
Unemployment is still elevated at 5.4% and wage growth has been subdued, while cost‑of‑living pressures continue to bite. A softer ANZ‑Roy Morgan confidence reading in February, with the index slipping to 100.1, also shows households remain cautious about big‑ticket spending. Higher fuel prices following the conflict in the Middle East may add to transport costs and broader inflation, posing another challenge for retailers and households alike.
Read the full Westpac report here.
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