Kiwi spending on UK retail sites surges after Brexit
Total online retail spending was up 10 per cent in June compared to the same period the previous year, with food, computers, hardware and department store purchases being key contributors, according to the latest BNZ monthly report on New Zealand’s online retail sales.
The report also revealed spending by New Zealanders on UK retail sites has increased 47 per cent, compared to the same week the previous year, in the week immediately after Britain announced its decision to leave the European Union.
“If we look at Kiwi’s online spending in terms of UK pounds rather than NZ dollars, spending at UK sites in the last week of June was up 78 per cent – a considerable increase on the same week last year,” said Gary Baker, director of Institutional Research at the Bank of New Zealand.
Baker said growth in online purchases by Kiwis from offshore sites remains strong, up nine per cent on June last year, but the growth rate has been softening in recent months. He said after a slow start to the month, spending picked up in the second half of June.
“Purchases from the UK were particularly strong following the ‘Brexit’ result, and we explore this overleaf.”
Spending on UK sites were spread across all categories, with clothing, cosmetics and pharmacy, computers and tech accessories and outdoor equipment sporting the largest increases.
Baker said movements in the exchange rate were clearly a key factor.
“Just prior to the ‘Brexit’ vote the exchange rate was 0.49 UK pounds per New Zealand dollar. The NZ dollar was 12 per cent stronger against the pound compared to where it was 12 months earlier,” he said.
Baker said the pound weakened immediately on the ‘Brexit’ results and the exchange rate ended June at 0.54 UK pounds per New Zealand dollar, “which meant the NZ dollar was 24 per cent stronger against the pound than it was at the end of June last year”.
“On the one hand, the stronger Kiwi dollar lowers the spending level in New Zealand dollar terms, because the same goods now cost less. But on the other hand the lower New Zealand prices can drive Kiwis to purchase higher quantities of goods, which pushes up the spending level. Clearly this second effect has dominated.”
Online spending by New Zealanders at local merchants was up 14 per cent in June compared to the prior corresponding period, well ahead of the seven per cent annual growth rate for sales at physical stores, according to Statistics NZ figures for electronic card transactions for core retail excluding hospitality.