Card spending falls for a second month, contradicting bank data before OCR call

Retail card spending fell 0.4%, or $30 million, in September, Stats NZ said on Friday. Spending in the core retail industries fell 0.7%, or $41m. Both figures are seasonally adjusted. Neither is adjusted for price changes.

September's fall follows a 0.9% drop in August, which Westpac noted was unrevised. Westpac had forecast a 0.8% rise.

These are the last official spending figures before the Reserve Bank's 28 October review, and they don't match the private data released earlier. ANZ's card figures had September spending up 0.5%, with hospitality up about 1%. Westpac's Spending Pulse had spending per person up 1.4%.

Hospitality shows the gap most clearly. Hospitality spending fell $33m, or 2.3%, according to Stats NZ, and was the biggest driver of the monthly fall, RNZ reported. Hospitality fell 1.9% in August, according to Westpac, so this is the second monthly drop.

"Retail spending disappointed in September as higher fuel prices crimped spending on nice to haves," Westpac said in its first-take note.

The fall wasn't confined to restaurants and cafes. Apparel spending fell 2.0%, the same drop as in August. Durables fell 0.4%, Westpac said, and RNZ put that fall at $6.6m. Groceries were the exception, with spending rising modestly.

Fuel explains why total retail held up better than core retail. Stats NZ's core retail measure excludes fuel and vehicles. The two reports disagree on how much fuel spending rose. Westpac put the increase at 2.9% and said petrol prices rebounded late in the month. RNZ reported a rise of $6.4m, or 1.3%, and linked it to higher global oil prices.

Westpac senior economist Darren Gibbs said the fuel-price rebound had siphoned money from households while wage growth stayed weak. He expects spending volumes to stay subdued.

The quarterly figures look slightly better on paper. Retail spending rose 0.1%, or $14m, in the September quarter, according to Stats NZ figures reported by RNZ. Food drove most of that gain, rising $109m, or 1.3%. Westpac said core spending rose 0.4% over the quarter. It said volumes were weak once higher prices were taken into account.

Spending was 0.9% higher than a year earlier, up from 0.2% in August, Stats NZ's figures show. Westpac said core spending was up 0.1% on a year earlier, after being flat the month before.

The data has gaps. Card transactions cover roughly 68% of core retail sales, investingLive reported. Big purchases often bought on finance, such as cars, furniture and appliances, don't show up well in card data. Next month's official quarterly retail trade survey could show somewhat stronger growth, Westpac said.

Stats NZ's food price index came out the same day. It was flat in September after a 0.3% rise in August, investingLive reported. Food prices were 2.4% higher than a year earlier, and food makes up nearly 19% of the consumers price index.

Manufacturers had a stronger month. The BNZ-BusinessNZ manufacturing index rose to 56.5 from 53.1, according to Newsquawk. But firms still listed fuel prices, the cost of living and uncertainty ahead of the election as concerns, investingLive reported.

Stats NZ releases September-quarter inflation on 22 October. Westpac forecasts a 0.7% rise in prices for the quarter, which would take annual inflation to 3.7% from 4.1%. The Reserve Bank forecast 3.9%. Westpac also sees some closely watched core inflation measures reaching the top of the Reserve Bank's target band. It said easing fuel costs would be offset by higher council rates, building costs and food prices.

Inflation is likely to pick up again in the December quarter, Westpac chief economist Kelly Eckhold said, with a 1.1% rise taking annual inflation to 4.2%, a three-year high. Calling the environment "all gas, no brakes", he pointed to higher global fuel prices and a fall of more than 4% in the New Zealand dollar since early September. Petrol prices rose about 50 cents a litre in a month, and 91 unleaded reached a record national average of $3.53, interest.co.nz reported.

On rates, Westpac picks the Reserve Bank to hold the official cash rate at 2.75% on 28 October and raise it to 3% at the 9 December Monetary Policy Statement.