Consumer spending shifts, big purchases decline

Kiwibank has released its latest Household Spending Tracker for the June quarter, revealing a rebound of 4% in electronic card spend.

Year-on-year, spending increased by almost 5%, although this marked the smallest annual growth since June 2021.

Kiwibank senior economist Mary Jo Vergara (pictured above) said both the spending value and volume had surpassed pre-COVID levels, supported by historically low unemployment rates, a growing Kiwibank customer base and a stronger preference for contactless payments.

However, Vergara said a closer look at spending categories highlighted changing preferences among Kiwi households.

“There’s little willingness among Kiwi households to splurge on the big stuff,” Vergara said. “The average monthly volume of spend on home contents and furnishings is sitting around 3% below pre-COVID levels.”

“But there’s still appetite for the little things in life, like a well-brewed cup of coffee. Over the June quarter, spend at restaurants, bars and cafés lifted 4%.

Vergara said New Zealanders had gone from saying “hey big spender” to “bye bye big spender”

Consumer confidence, while bouncing back from recent lows, remained historically weak due to high inflation, rising interest rates, and declining house prices over the past 18 months.

Vergara said the weakened wealth effect and squeezed disposable incomes had led to restrained discretionary spending among households.

The outlook for household spending remained unchanged, as many mortgages transition from low rates to higher rates, affecting 40% of mortgages in the next six months. This was expected to further impact household consumption.

Key trends in spending revealed in the Kiwibank include:

• Grocery store spending continues to grow in dollar value, outpacing transaction volume growth. Nominal spend rose by 3.5% over the quarter, while transaction volume increased by just 1.8%.
• Spending on petrol saw a spike of 67% in the last three days of June, likely due to the impending reintroduction of the 25c  fuel excise duty tax from July 1.
• Discretionary items, such as home contents and furnishings, experienced a decline in demand, with spending down by 6% compared to the previous year.
• The annual Fieldays event reported strong sales, but consumers were focused on finding the best deals. Spending on farming supplies increased by an average of 5% in transaction volume but saw a modest 2% increase in spend value.
• Despite recovering airline capacity, total spend on flight bookings declined by 4.5% over the quarter, despite a 2.3% increase in transaction volume.
• Entertainment spending decreased by 4.4% during the quarter, and there are no plans for Taylor Swift's Eras Tour to visit New Zealand.
• Spending on sporting events increased in anticipation of the upcoming FIFA Women's World Cup.

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