NZ businesses now confident of surviving after June spending sees uplift
After seeing an uplift in spending in June, about 73 per cent of retailers are now saying they are confident their businesses will survive the next 12 months, according to the Retail NZ Retail Radar report.
Greg Harford, Retail NZ chief executive, said the last few months have been extraordinarily challenging for the retail sector, and although sales over the last few months have not recovered completely, it is good news that there is a significant uplift in spending last month.
He said the boost in spending could partly be attributable to pent-up demand from the lockdown period.
“It also reflects the fact that Kiwis are not travelling overseas, and are instead undertaking projects at home,” Harford said.
Data from New Zealand’s payment service Paymark also showed a strong rebound in spending in June.
Indicative of this pattern is an underlying group of core retail merchants which experienced 7.1 per cent higher payments through Paymark this June relative to June last year, bringing the quarterly annual rate of change for the group to -15.5 per cent, and compares with annual growth rates of 3.6 per cent in the March quarter and 4.8 per cent for the June quarter last year.
Paymark said the situation remains mixed, however, with hospitality merchants in total still recording lower spending, but added that the -6.1 per cent annual change for June was significantly better than the whopping -47.9 per cent averaged over the June quarter.
The remaining core retail merchants, which are primarily retail shops, are experiencing higher-than-trend growth rates, being 11.6 per cent in June.
According to Paymark, one reason for the higher spending growth within the core retail shops – as opposed to hotels, cafes, bars etc – is the higher amount being spent during each transaction.
Twelve months ago the average spend among these shops was $47; in June the average was $51 per transaction.
Paymark stated the exact reason for this increase cannot be established from their figures but the likely inference is that people are practicing less social contact while shopping.
Harford said the recent data has shown significant improvement but said there are significant economic clouds on the horizon.
“Many jobs across the economy are at risk once the Government Wage Subsidy ends, and a number of households have taken mortgage holidays or accessed other support which will also end in the near future,” he said. “These factors will likely squeeze consumer spending further, as households tighten their belts in the coming months.”
According to Harford, improved confidence has also seen a significant improvement in employment prospects in the retail sector, with the expected number of layoffs substantially down.
“Retail NZ is now forecasting a net loss of around 6,000 jobs from the retail sector in the coming months,” he said.
He added that are also substantial supply chain challenges facing the sector at the present time.
“Forty-one per cent of retailers report that they are facing difficulties sourcing stock, because of reduced production abroad and freight challenges,” Harford said. “There are delays getting stock into New Zealand, and in some cases retailers are looking for alternative sources of product.”
Harford said it is critical for the Government to remain focused on border security to prevent a further recurrence of Covid-19 in New Zealand, but it also needs to look at ways to stimulate the economy.
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