Shoppers cut back for a second month as petrol and mortgage costs bite
New Zealanders spent less in shops than a year earlier for a second month running in September. The steepest fall was in spending that is easiest to put off.
Core retail spending through Paymark's card network came to $3.57 billion in September. That was 1.3% lower than a year earlier, according to Paymark figures reported by RNZ on Monday 5 October. August's year-on-year fall was steeper: $3.7b, down 1.8% on August 2025.
The sharpest change was in non-food retail. Paymark defines this as core retail excluding supermarkets, liquor stores, hotels, bars, cafés and restaurants. In the first seven days of July, non-food spending was 0.9% ahead of a year earlier. By the last seven days of September it was 7.1% behind.
Paymark chief sales officer Bruce Proffit gave three reasons. "Firstly, petrol prices started rising again in July and jumped sharply in mid-September," he said, as reported by RNZ. Spending at fuel outlets through Paymark was 35% higher than a year earlier in the week to 30 September, "largely due to higher prices but also due to more transactions."
"Interest rates have also risen over the last three months, due both to tighter New Zealand monetary policy and to higher international long-term interest rates," Proffit said. He also blamed cold, wet and windy weather on the last weekend of September for keeping people at home.
"This shows New Zealand in 2026 is off to a slower start to the usual end-of-year surge as we approach the pre-Christmas shopping season," Proffit said.
Pump prices haven't eased. Gaspy put the national average for 91 unleaded at $3.505 a litre on Monday, RNZ reported, just above the April peak of $3.502.
Some regions were hit much harder than others. Marlborough had the weakest September, with core retail spending down 9.7% on a year earlier. The West Coast fell 3.3%, Wellington 2.4% and Bay of Plenty 2.2%. Spending rose in Gisborne, up 3.1%, and in Hawke's Bay, up 2.8%.
ASB's quarterly forecast, also published on Monday, points the same way. ASB chief economist Kim Mundy said consumer spending fell in the June quarter after six straight quarterly rises, and she expects only a modest rebound in the September quarter. "Households are likely to remain cautious for some time," she said. ASB sees growth staying uneven and coming mainly from exports until pressure on household budgets eases, which it expects in 2027.
"For some people, the recovery has arrived," Mundy said. She was referring to rural areas and places doing well out of tourism.
Nationally, though, unemployment reached an 11-year high of 5.6% in the June quarter, and ASB forecasts it will stay in the mid-5% range until late next year.
Even so, ASB forecasts two more rises in the official cash rate (OCR) before Christmas. The next Reserve Bank decision is on 28 October.
Westpac also expects more rises. In a bulletin last week, Westpac economists projected a 25 basis-point rise at the Reserve Bank's December meeting and a peak of 4% next year. Senior economist Satish Ranchhod said the inflation pressure comes largely from prices that households can't easily avoid. Over the past year, council rates rose nearly 9%, electricity prices 12% and health insurance premiums 19%.
Ranchhod accepted that higher rates will hurt businesses that have nothing to do with those bills. Tighter policy will "dampen demand and price-setting in other more interest rate-sensitive parts of the economy such as the construction sector or discretionary retail spending," he said, calling it "an uncomfortable but necessary trade-off."
The Paymark figures suggest that discretionary retail spending is already falling, before any further rises. Westpac's case rests on inflation. Annual inflation was 4.1% in the June quarter, and Stats NZ said it would have been 2.9% if fuel prices had not changed. Ranchhod expects inflation to stay above the Reserve Bank's 1–3% target band until at least mid-2027.
Markets do not treat an October rise as certain. In late September, Westpac said traders put the chance of a rise in October at about 65%, rising to near certainty by December.