Electronic card spending at retailers rises

Wednesday 10th June 2009

Electronic card spending at New Zealand retailers rose last month, suggesting lower interest rates and tax cuts are beginning to revive consumer spending.

Retail transactions on credit and debit cards rose 0.9% in May, following a 0.4% increase in the previous month, according to Statistics New Zealand. Transactions at core retailers, which exclude auto-related sales, climbed 1.6% in the latest month and were up 4.2% year-on-year, the highest since March 2008.

Signs of a revival in consumer spending come amid a pick-up in inbound migration and signs of life in the housing market, stoking expectations central bank Governor Alan Bollard will be less inclined to cut interest rates from a record low 2.5% tomorrow.

“We expect to see growth in retail spending pick up a little further as the year progresses,” said Darren Gibbs, chief economist at Deutsche Bank. Still, a strong rebound isn’t expected with many consumers feeling less secure in their jobs and households reducing debt, he said.

Underlining a trend by consumers to avoid stacking on more debt, the proportion of total transactions on debit cards rose to 56.9% of the total last month, the highest since the government statistician began tracking the series.

The electronic card figures are an early heads up for retail spending, accounting for some 75% of all spending through the core retail sector.

Statistics New Zealand is scheduled to release retail sales for April on Friday, with a seasonally adjusted gain of 0.2% expected, based on a Reuters survey, a turnaround from the previous month’s 0.4% slide. Ex-auto sales are forecast to rise 0.4%.

The New Zealand dollar was recently at 62.82 US cents, up from about 61.70 cents in local trading yesterday afternoon.

The NZX Consumer Index edged up 0.4%, with Restaurant Brands NZ gaining 3% to $1 and Michael Hill International climbing about 3% to 69 cents.

Businesswire.co.nz

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