This week, Statistics New Zealand released data on electronic card transactions, which showed that retail spending fell 2% in February to be flat over the year.
Westpac’s economics team noted that household spending is flagging despite record immigration-driven population growth:
“Taking a look at the longer-term trend, it’s clear that New Zealanders’ spending appetites are flagging”.
“Spending has effectively been flat for a year. That’s despite the population growing by close to 2.8% and continued increases in international visitor numbers”.
“The softness in spending highlights the squeeze on households’ spending power from higher inflation and interest rates”.
“We’re also likely seeing some households putting their cards back in their wallets due to nervousness about the economic outlook and the softening in the jobs market”.
“Overall today’s data reinforces the picture of softening domestic demand. We expect households to remain cautious with regards to their spending over the coming months. That’s likely to be compounded by the softening in the labour market already in train”.
Westpac has also released its preview of Q4 GDP, which will be released by Statistics New Zealand next Thursday.
Westpac is expecting a flat (0.0%) result, meaning per capita GDP will continue to fall amid rapid immigration-led population growth.
Westpac’s Q4 new Zealand GDP forecasts
“This is a slight downgrade from the 0.1% rise that we pencilled in for our recent Economic Overview, but is in line with the Reserve Bank’s estimate in its February Monetary Policy Statement”, Westpac notes.
“Market forecasts haven’t been surveyed yet, but they are likely to end up in the same ballpark”.
“Our final forecast is in keeping with the recent run of activity indicators that pointed to ongoing softness in areas like construction, manufacturing and retail – just less so than in the September quarter”.
“That’s happened at a time when the country has seen the strongest population growth in its modern history, with inward migration playing catch-up after three years of the border being closed”.
“As a result, GDP per person has fallen by almost 4% from its peak”, Westpac noted.
Despite the sharp decline in per capita GDP, Westpac is unconvinced whether it will be enough to pull inflation back to the Reserve Bank’s target:
“We do expect a further cooling in the economy over the year ahead, as high interest rates continue to have their effect. But it remains an open question as to whether this will be enough to rein in inflation as quickly as the RBNZ is predicting”, Westpac said.
Much like other Anglo nations, New Zealand is mired in stagflation.
