NZ card spending dips again in September as food prices stay flat

The latest figures add to a varied outlook for the New Zealand dollar, as soft household spending offsets the more encouraging manufacturing survey released earlier in the day. A second consecutive monthly decline in card spending signals subdued domestic demand, which tends to argue against tighter monetary policy, while unchanged food prices remove one source of upward pressure on inflation for the month. Fuel costs, which manufacturers highlighted as a major worry, continue to be the larger variable for household budgets, keeping oil prices important for the consumer outlook.

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Yesterday:

• RBNZ's Conway says October rate decision completely open, OCR more likely to rise

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New Zealand's manufacturers are gaining momentum, but its consumers are still holding back on spending, and flat food prices offer only limited comfort.

Summary:

• Seasonally adjusted electronic card retail spending fell 0.4% in September, after a 0.9% drop in August
• Actual card spending rose 0.9% from a year earlier, up from 0.2% in August
• Card data covers about 68% of core retail sales
• Food prices were unchanged on the month, after a 0.3% rise in August, and up 2.4% on the year
• Food accounts for nearly 19% of the consumers price index
• The weak consumer data contrasts with a strong manufacturing PMI released the same day

Electronic card retail spending in New Zealand dropped for a second straight month in September, while food prices remained unchanged, based on figures released Friday by Statistics New Zealand. The numbers indicate cautious households even as other sectors of the economy show signs of life.

Seasonally adjusted retail spending on electronic cards fell 0.4% from August, following a 0.9% decrease the prior month. In unadjusted terms, actual spending was 0.9% higher than in September last year, a stronger annual pace than the 0.2% seen in August. Electronic card transactions cover approximately 68% of core retail sales and serve as the primary monthly indicator of retail activity in New Zealand.

The data point to ongoing consumer strain. Consecutive monthly declines in spending, once adjusted for seasonality, suggest households are trimming discretionary purchases, while the annual rise in actual spending remains modest. Since the card data tracks the value of transactions rather than volumes, a portion of that increase reflects higher prices.

In a separate release, Statistics New Zealand's food price index was unchanged in September from August, following a 0.3% rise the previous month. Food prices were 2.4% higher than a year earlier. Food has a weight of nearly 19% in the consumers price index, so a flat monthly figure removes one source of upward pressure on headline inflation for the month.

The weaker consumer data stands in contrast to a brighter picture from manufacturers. The BNZ-BusinessNZ manufacturing index released earlier on Friday showed the sector expanding at a notably stronger rate in September. However, many firms cited fuel prices, cost of living pressures, and uncertainty ahead of the election as concerns.

Together, the releases depict an economy where production and orders are picking up, but household spending is lagging, constrained by living costs. A halt in food price growth provides some relief. On its own, however, it is unlikely to change the overall picture for household budgets while fuel costs remain high.

The next signs of consumer strength will come from upcoming retail and inflation data. These will indicate whether September's weakness in card spending continues into the final quarter, when pre-Christmas demand typically provides a seasonal boost.