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NEW ZEALAND: VIEW: Westpac Expects Spending Recovery To Continue

NEW ZEALAND
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NZ retail card spending posted a third consecutive monthly rise in October up 0.6% m/m after 0.1% signalling that the sector may be turning around. Total spending rose 0.4% m/m after 0.3% and is now slightly positive on a year ago. Rate cuts since August and tax reductions implemented in July may be supporting the rise in spending. Westpac sees the October data as “encouraging” and that there should be further rises once past and future rate cuts are fully felt.

  • Westpac observes that “most mortgages have not come up for refixing yet. In addition, further cuts from the RBNZ are expected over the coming months (we’re forecasting another 50bp cut at the upcoming November meeting).”
  • It cautioned that “a couple of factors will restrain the rise in spending over the coming months. First is the softening in the labour market. Unemployment has risen to 4.8%, and we expect it will rise above 5% before the end of this year. In addition, population growth has now turned down as net migration drops back.”
  • “Looking more closely at the details of the October spending report, the main category that recorded a rise was the hospitality sector. We’ve also seen the earlier falls in spending on durables (like household furnishings) and apparel flattening off. Those are all discretionary spending areas.”
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NZ retail card spending posted a third consecutive monthly rise in October up 0.6% m/m after 0.1% signalling that the sector may be turning around. Total spending rose 0.4% m/m after 0.3% and is now slightly positive on a year ago. Rate cuts since August and tax reductions implemented in July may be supporting the rise in spending. Westpac sees the October data as “encouraging” and that there should be further rises once past and future rate cuts are fully felt.

  • Westpac observes that “most mortgages have not come up for refixing yet. In addition, further cuts from the RBNZ are expected over the coming months (we’re forecasting another 50bp cut at the upcoming November meeting).”
  • It cautioned that “a couple of factors will restrain the rise in spending over the coming months. First is the softening in the labour market. Unemployment has risen to 4.8%, and we expect it will rise above 5% before the end of this year. In addition, population growth has now turned down as net migration drops back.”
  • “Looking more closely at the details of the October spending report, the main category that recorded a rise was the hospitality sector. We’ve also seen the earlier falls in spending on durables (like household furnishings) and apparel flattening off. Those are all discretionary spending areas.”