Retail spending rallied in December, according to the latest retail trade survey, which highlighted hospitality spending.
Core retail sales volumes, which exclude motor vehicle and fuel retailing, rose 1.4 percent in December 2024 from the September quarter (seasonally adjusted). December quarter spending volumes were 0.2 percent higher than a year ago, the first annual increase since the September 2022 quarter.
Core retail sales volumes per capita also rose, up 1.2 percent, the first lift of any substance since early 2022. Despite the lift, spending volumes per capita remain 12 percent below peak levels seen in mid-2021.
Spending growth was broad-based, with nine of the 13 core industries seeing a lift in seasonally adjusted spending volumes. Tourism-based spending rose the most, with a 7.6 percent lift in accommodation volumes and a 2.3 percent lift in food and beverage services (bars, cafes, and restaurants).
More discretionary spending is evident, with a 5.8 percent lift in recreational goods, and a 5.1 percent lift in electronic retailing spending volumes.
There was evidence of more discounting in the December quarter, with retail deflators for electronic, recreational goods, household goods, and department stores implying lower prices.
Core spending values in December were higher than a year ago across most regions, led by 9.1 percent pa growth in Otago, 3.3 percent pa growth in Marlborough, and 3.2 percent pa growth in Canterbury.
Infometrics Principal Economist Brad Olsen said that spending activity lifted in the December quarter, a further sign of improving economic trends and an encouraging sign the economy is set to shift gears in 2025.
Spending growth was broad-based and across several discretionary store types, showing a lift in spending appetite and ability by households as mortgage pressures start to lessen and inflationary concerns recede.
These retail trade figures, and inflation data, suggest that part of this increase in spending has been supported by more retailers offering discounts, which are clearly working to shift stock. Retailers have been running down stock levels over the last year to less elevated levels.
Spending growth was far stronger in the South Island than the North Island, at 4.3 percent pa compared to 0.6 percent pa. This gap reflects better international tourist arrivals at the end of 2024, benefiting the South Island tourism areas, as well as stronger primary sector returns, especially for dairy. In contrast, some urban centres remain under pressure, with Auckland and Wellington experiencing very slow growth, of 0.5 percent and 0.4 percent pa, respectively.
Increasing spending volumes will be welcome news to retailers, but despite the lift, spending levels remain well below where they were a couple of years ago, meaning the economy’s recovery has a fair way to run yet.
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