New Zealanders kept their wallets firmly shut in June, with card spending barely moving from the month before. ANZ, one of the country's largest banks, reported that total card spending rose just 0.1% in June compared to May, a figure that underscores the cautious mood among consumers.
The data, drawn from ANZ's own card transactions, showed a split beneath the surface. Spending on hospitality — restaurants, cafes, and bars — declined, while tourism and recreation categories posted gains. This tug-of-war suggests that while some households are willing to spend on experiences and travel, everyday dining out is taking a hit.
What's Behind the Flat Spending?
Card spending is a closely watched indicator of consumer health in New Zealand, where household consumption accounts for a large share of economic activity. A flat reading for June points to ongoing restraint, even as inflation has eased from its 2022 peak and the Reserve Bank of New Zealand (RBNZ) has held the official cash rate at 5.5% since May 2023.
High interest rates continue to squeeze household budgets, particularly for those with mortgages. The RBNZ's aggressive tightening cycle — which lifted rates from a record low of 0.25% to the current level — has cooled demand across the economy. Recent data on retail sales and business confidence have also pointed to sluggish conditions.
The weakness in hospitality spending is a particular concern, as it often signals that households are cutting back on discretionary outlays. Restaurants and cafes are typically among the first areas consumers trim when they feel financially stretched. In contrast, the uptick in tourism and recreation may reflect a shift toward cheaper or more occasional spending, such as local getaways or outdoor activities, rather than a broad recovery in consumer confidence.
Broader Economic Context
New Zealand's economy has been navigating a tricky period. Gross domestic product contracted in the second half of 2023, and while early 2024 saw a modest rebound, growth remains tepid. The labor market has softened, with unemployment rising to 4.3% in the first quarter of 2024 from a low of 3.2% in 2022.
Inflation, however, has come down significantly. The annual rate was 4.0% in the first quarter of 2024, down from a peak of 7.3% in 2022. That has fueled expectations that the RBNZ may begin cutting rates later this year, though the central bank has signaled it wants to see more evidence that inflation is sustainably under control before easing.
The flat card spending data adds to the case for rate cuts, but it also highlights the uneven nature of the slowdown. While tourism and recreation spending held up, the broader picture is one of caution. This mirrors trends seen in other developed economies, where consumers are prioritizing experiences over goods but remain wary of big-ticket purchases.
For context, similar trends have been observed across the Tasman. Australia's Westpac card tracker recently slipped, as reported in our article Westpac Card Tracker Slips as Australian Consumer Spending Loses Steam, indicating that consumers in both countries are pulling back.
What It Means for Investors
For everyday investors, the flat spending data is a reminder that the New Zealand economy is still in a soft patch. Companies that rely heavily on consumer discretionary spending — particularly in hospitality and retail — may continue to face headwinds. On the other hand, businesses tied to tourism and recreation could see more resilience, especially as international visitor numbers recover.
The data also keeps the focus on the RBNZ's next moves. If consumer spending remains weak, it could accelerate the case for rate cuts, which would be a positive for bond prices and could support equity valuations, particularly for rate-sensitive sectors like housing and utilities. However, if inflation proves sticky, the central bank may hold rates higher for longer, prolonging the squeeze on households and businesses.
New Zealand stocks have shown some resilience recently, with the benchmark index hitting a record high in June, partly on hopes of lower rates. As we covered in New Zealand Stocks Hit Record High as OPEC+ Boosts Oil Supply, the market has been buoyed by global factors as well. But the domestic spending picture remains a key variable.
Investors should watch upcoming data releases, including retail sales and consumer confidence surveys, for further clues on the trajectory of spending. The RBNZ's next monetary policy decision, due in August, will be a major event. Any shift in language or forecasts could move markets.
In the meantime, the June card spending data suggests that New Zealanders are still feeling the pinch. Until there is clearer evidence of a turnaround, caution is likely to remain the watchword for both consumers and investors.
