New Zealand’s consumer spending drop hints at shrinking economy

[WELLINGTON] New Zealand consumers scaled back spending in the three months to June, reinforcing expectations the economy took a step backwards in the period. Debit and credit card spending per person slipped to NZ$5,045 (S$3,863) in the second quarter, the lowest reading since the first three months of 2022, Statistics New Zealand data showed on Friday (Sep 12) in Wellington. There were 94 transactions per head, matching an almost three-year low. The Reserve Bank of New Zealand (RBNZ) and most economists expect gross domestic product contracted in the second quarter as rising unemployment and flat house prices prompted consumers to hunker down. The GDP report due Sep 18 is also expected to reveal weakness in construction and manufacturing output as many firms curbed investment amid uncertainty over the impact of US tariff policy. The reluctance to spend, particularly on discretionary items such as travel and dining out, comes despite the RBNZ cutting interest rates by 250 basis points since August last year. While home-loan rates are falling, many borrowers on fixed-terms are yet to get the full benefit yet and as a result, are watching their budgets closely. RBNZ governor Christian Hawkesby said this week that policymakers had been surprised by the “confidence shock” in the second quarter. He said that the bank expects a pickup in growth in the second half and reiterated an intention to cut the Official Cash Rate to 2.5 per cent by the end of the year from 3 per cent, assuming the data was consistent with the central bank’s expectations. Leading indicators for the third quarter have hinted at a modest GDP recovery. Retail card spending rose for the third straight month in August, Statistics New Zealand said on Friday. Still, the performance of a manufacturing index dipped to 49.9 in August, indicating a slight contraction, the Bank of New Zealand said. BLOOMBERG