Household ‘coping mode’ has direct implications for borrowing capacity
New Zealand households are keeping retail card spending afloat, but only by reshuffling already tight budgets.
Stats NZ electronic card data show retail spending rose 0.7% in March, with annual growth at 2.7%. However, once fuel and vehicle purchases are stripped out, core retail spending edged down 0.1% over the month and is up just 2.1% over the year.
That outcome means retail spending over the March quarter grew about 1%, the strongest quarterly result since late 2024, with core spending showing a similar lift.
Darren Gibbs (pictured left), Westpac senior economist, notes that “Increased spending on fuel was responsible for an overall lift in spending in March,” as petrol prices jumped almost 19% in the month and fuel spending rose more than 17%.
ASB’s analysis of the same Stats NZ release paints a similar picture of households coping rather than enjoying a genuine upswing. Jane Turner (pictured right), ASB senior economist, notes that total electronic card spending lifted 1.3% in March, with fuel up 17% on the back of higher petrol and diesel prices, while core household spending proved slightly more resilient than the bank had expected.
Both banks highlight that the apparent resilience in headline spending masks ongoing pressure on real activity and discretionary demand – a combination that matters for serviceability assessments and loan structuring.
Discretionary spend cut to protect essentials
The mix of spending suggests many households are trimming non‑essential purchases to protect essentials like fuel and groceries.
Westpac points out that while consumables and durable goods saw some growth, this was “more than offset by a decline in spending on hospitality and at apparel stores (the latter 4% lower than a year earlier).”
Westpac also notes that the stronger March quarter is consistent with signs of improving momentum at the start of the year but cautions that big‑ticket items often bought on credit – such as vehicles, furniture, and appliances – are not fully captured in the card figures.
Against that backdrop, the bank expects retail spending volumes to drift lower this quarter, even as the value of spending is held up by higher prices.
Gibbs warns that “high fuel prices will continue to siphon money out of households’ pockets” and add to production costs across the economy.
Both Westpac and ASB expect high fuel costs to keep reshaping spending patterns over the coming months, with households directing more of their budgets towards essentials and trimming back discretionary outlays.
Westpac anticipates a modest decline in spending volumes this quarter even as higher prices hold up the value of sales, while ASB stresses that the resilience of household spending will influence how soon and how hard the Reserve Bank may need to respond to the latest inflation pulse.
For more insights, read the Westpac and ASB reports.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
