Spending on debit, credit cards rises in July, as apparel sales surge

The value of core retail spending rose 0.5% to $3.9 billion in July from June.

New Zealand spending on electronic cards rose for the third consecutive month in July, led by a surge in spending on apparel, that sector's first gain since February.

The value of core retail spending, which strips out fuel and vehicle related items, rose 0.5% to $3.9 billion in July from June, accelerating from the previous month's revised 0.1% gain, according to Statistics New Zealand. On an annual basis, core retail spending rose 6.6% from July last year.

The electronic cards data adds to a mixed picture for the New Zealand economy. Business, consumer and farmer confidence has declined as dairy prices, the nation's key commodity export, remain lower for longer, prompting the Reserve Bank to start reducing interest rates. However a weaker kiwi dollar is aiding exporters, while the economy is getting a boost from construction activity in Canterbury and Auckland, and strong inbound migration and tourists.

A lift in spending was recorded across all but one of the retail industries, with durables unchanged at $1.1 billion. Apparel snapped four consecutive months of decline to rise 3.6% to $295 million, while consumables, the largest retail measure, rose 0.2% to $1.7 billion and hospitality gained 0.7% to $796 million.

"While high levels of migration and strong tourist demand continue to provide support, consumer confidence has clearly come off the boil and is likely to fall further as the shock of lower dairy prices percolates through the economy," said Felix Delbruck, senior economist at Westpac Banking Corp. "We would expect the pulse of card spending to remain fairly uninspiring in the next few months."

Outside the core retail sector, electronic card spending on fuel rose 0.1% to $631 million, while vehicles gained 2.4% to $152 million. Overall, the total retail sector rose 0.4% to $4.7 billion, for an annual gain of 5.6%.

There were 105 million transactions in July, up 6.2% from the same month the previous year. The average value of transactions was $50, with 55.7% putting purchases on their debit cards.