Kiwis spent heavily on entertainment as Covid restrictions eased

Rugby fans at the World Cup match between New Zealand and Australia at Eden Park on Saturday. Photo / Dean Purcell

Consumer spending is still holding up, although signs of a slowdown are emerging, according to Kiwibank’s latest Spending Tracker.

Kiwibank’s electronic card spending rose 3.1 percent in the September quarter.

A big jump in entertainment spending and a broad shift toward spending on services, and away from goods, underpinned the trend.

“Historically low unemployment continues to support household income and, in turn, consumption,” said Kiwibank chief economist Jarrod Kerr.

“However, households face a difficult trio of rising interest rates, rising cost of living and falling house prices.

“In an increasingly expensive environment, the appetite to spend is weakening. The evidence for this is already mounting.”

When adjusted for inflation, consumer spending increased by a smaller amount, 2.1 percent.

“A third of spending categories tracked by Kiwibank Economics saw a drop in transaction volume during the quarter,” Kerr said.

“Everyone was focused on the discretionary spending space.”

A slowdown in consumption was “by design” with the Reserve Bank raising interest rates.

“It is necessary to cool demand, restore balance to the economy and ultimately return the inflationary beast to its cave,” Kerr said.

As Covid restrictions were relaxed, the composition of consumer spending evolved.

New Zealanders were increasingly moving away from spending on goods and toward spending on services.

During the quarter, total spending on services expanded 11 percent. Total spending on goods fell slightly, falling 0.7 percent.

Spending on entertainment increased 10 percent during the September quarter.

Spending on sporting events was especially strong, up nearly 5 percent.

“Between rugby and football, there were plenty of opportunities to watch our national teams at home,” Kerr said.

Jarrod Kerr, chief economist at Kiwibank.  Photo / Supplied
Jarrod Kerr, chief economist at Kiwibank. Photo / Supplied

A turnover away from goods was to be expected after two years of spending on everything from swimming pools to pizza ovens, he said.

“Retail products have had their time in the sun. Now, the rising interest rate environment poses a challenge for retailers as households tighten their belts. However, the upcoming gift-giving season may delay the pain”.

Housing-related spending continued to fall during the quarter, down 4.5 percent.

“Consumer confidence has weakened, credit is harder to come by and the housing market is in a downturn. Households just aren’t in the mood to spend on big-ticket items,” Kerr said.

New Zealanders spent less at home and made fewer trips to hardware stores.

The value of spending on gasoline fell 4 percent, due to a combination of falling prices and fewer visits to the service station.

Gasoline consumption was weak.

With relatively cheap public transportation and working from home, Kiwis have turned to greener alternatives, Kerr said.

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