Consumer spending again to contribute strongly to New Zealand’s Q1 GDP growth

In March, retail spending on electronic cards in New Zealand grew moderately weaker than expected at 0.1%, as compared with February’s rise of 0.6% sa. Core spending, excluding motor vehicle and fuel related spending, grew slightly by 0.2%. Annual retail growth and core spending growth slowed, but continued to be decent.

Looking into details gives mixed signals, showing that retail spending is being impacted by several influences. Fuel retailing grew 0.3% month-on-month sa. This is the first growth in nine months and in line with the increase in fuel prices in that month. The warm weather wave is expected to have contributed to a decline of 2.3% in apparel spending, according to ANZ. Within core retail components, hospitality spending continued to perform well, growing 0.4% m/m and 11.7% y/y.  Meanwhile, consumables and durable spending saw flat outturns, growing 0.1% m/m.

Spending, on a trend basis, continued to be strong with total retail and core retail spending growing 1.2% 3m/3m and 2% 3m/3m respectively. The underlying volume story is strong and implies that consumer spending will contribute strongly to Q1 GDP growth again, noted ANZ.

Several tailwinds, such as low interest rates, upbeat tourism sector, solid growth in labor incomes and strong growth in population, have underpinned consumer spending, added ANZ. Moreover, consumer sentiment has performed quite well. However, the high consumer borrowing rates imply that the period of solid growth in consumer spending might be a limited one, said ANZ.