Data shows notable lean towards home entertainment over retail splurges
The majority of New Zealanders have continued to exhibit spending caution amidst persistent economic constraints, according to Kiwibank’s latest research.
The Kiwibank Household Spending Tracker for the December 2023 quarter and January 2024 revealed a notable restraint in consumer spending, with just a 0.4% increase over the same period in 2022, underscoring the ongoing impact of financial pressures on household disposable incomes.
Despite a 5% rise in consumer spending over the December quarter, this growth is significantly muted compared to previous years, with transactions in December down by 3% compared to 2022, and a 3.3% decrease over the quarter.
The findings suggested a trend towards more home-centric entertainment and dining, with a 6.2% increase in spending on home and online entertainment as New Zealanders opt for quieter nights in over nights out.
“Not even the allure of Black Friday and Boxing Day sales were appealing enough for Kiwi to loosen the purse strings,” said Mary Jo Vergara (pictured above), Kiwibank senior economist, in a media release.
Tight financial conditions and squeezed household disposable incomes are leading New Zealanders to cut back, with discretionary purchases like home electronics increasingly being excluded from their budgets.
Hospitality’s holiday downturn continues into 2024
The hospitality sector, usually buoyant during the December period, experienced a downturn, with spending at restaurants, bars, and cafes all seeing declines over the quarter.
Early data for 2024 indicated this trend is continuing, despite a brief uptick in Auckland during its anniversary weekend, largely attributed to events such as the Red Bull Cliff Diving World Series finale at Wynyard Quarter.
“New Zealand's two biggest cities enjoyed their respective anniversary days in January, with Auckland taking the crown for 'Big Spender' with a 6% lift in total spend volumes at restaurants, bars, and café s over the long weekend, compared to 2023,” Vergara said.
“In contrast, spending volumes during the Wellington anniversary weekend declined by 3.2% compared to 2023. Auckland’s Wynyard Quarter hosted the finale of the Red Bull Cliff Diving World Series, which likely helped make a splash in spend over the long weekend.”
Grocery spending rises as Kiwis opt for home entertainment
Grocery spending, on the other hand, saw a 5.4% increase, with significant portions of this spending occurring on the days leading up to Christmas. This rise included a 6.2% increase in fruit and vegetable spending and a notable 28% increase in alcohol and liquor spending.
“Again, this shows that Kiwi took to entertaining at home, stocking the pantry and keeping busy in the kitchen as a way to keep discretionary spending low,” Vergara said.
“There was also a 5.1% lift at the local butcher. Meat prices have come under pressure as products, especially lamb and mutton, from across the Tasman, continue to flood overseas markets. The value of spend is down 1.2% from last year's levels despite the rise in volumes.”
Retail sector faces bargain hunting and declining demand
In the retail sector, while some categories like home contents and furnishings (+1.3%) saw an increase in transaction volumes, their value of spending (-5%) declined, reflecting a trend towards bargain hunting amid tight financial conditions.
Clothing and home electronics both saw declines in spending value and volume, both by around 11% compared to a year ago, indicating broader challenges in retail demand.
“Everywhere you looked, retailers seemed to offer bargains, discounts, and deals,” Vergara said. “For some, November's Black Friday lasted a week, while Boxing Day sales began before we even cut into the Christmas ham. On top of that, the type of retail on sale was across the spectrum – from clothing to couches, electronics to e-bikes, frisbees to fridges, and hammocks to hardware.”
The Kiwibank economist pointed out that the overall struggle in retail spending reflected the challenges households face due to tight financial conditions.
View the full Kiwibank report on the bank’s household spending insights page.
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