New Zealand spending slowdown adds to signs of cooling economy
Sentiment is being challenged by a soft housing market, rising unemployment and a high cost of living
[WELLINGTON] New Zealand retail card spending fell in the second quarter, adding to signs that an initial spurt of economic growth early this year has all but disappeared.
Purchases on debit and credit cards at retail stores fell 0.7 per cent from Q1, when it was unchanged, Statistics New Zealand said on Monday (Jul 14) in Wellington. The value of spending is lower than in the year-earlier quarter when the economy was entering a deep depression.
Sluggish consumer spending mirrors recent data showing the services and manufacturing industries remained in contraction in the month of June. The slowdown in domestic demand suggests gross domestic product barely expanded in Q2 after an 0.8 per cent growth in the three months to March.
Sentiment is being challenged by a soft housing market, rising unemployment and a high cost of living. While home-loan interest rates are falling, many borrowers on fixed terms are yet to get the full benefit until their mortgages roll over later this year, and are watching their budgets closely.
The report showed spending on discretionary items such as hospitality, apparel, motor vehicles and durable goods such as appliances fell in the quarter. Purchases of consumable items such as groceries gained.
Household confidence may also be dented by the Reserve Bank of New Zealand’s decision last week to keep the official cash rate unchanged at 3.25 per cent, although policymakers did signal further cuts are expected.
At the same time, business confidence has been buffeted by uncertainty over US tariff policies and their impact on global economic growth.
Earlier on Monday, Business New Zealand and the Bank of New Zealand (BNZ) reported that the services industry contracted for a fifth straight month, while the organisations last week said manufacturing had shrunk for a second consecutive month.
“The timeline for New Zealand’s long-awaited economic recovery just keeps getting pushed further and further out,” said Doug Steel, senior economist at BNZ in Wellington. He expects GDP contracted in Q2. BLOOMBERG
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