Retailers can expect a more favourable trading environment ahead as recent studies show inflation in the country is easing.
The positive outlook coincides with new retail spending data showing a strong improvement in July.
The Reserve Bank’s Survey of Expectations, released last week, shows that the one-year-ahead inflation expectations fell from 3.41 per cent to 2.6 per cent, while the two-year-ahead expectations also dropped from 2.53 per cent to 2.34 per cent.
Although Middle East-related energy shocks are keeping near-term inflation elevated, the Reserve Bank said recent fuel price declines have provided some relief.
“We still expect them to continue their path of hiking rates to 3 per cent, but we now see more hope that they will hold there for the next year,” Kiwi Economics commented on the findings. “Will 2027 finally be the year of recovery? We definitely hope so.”
The result suggests the domestic recovery remains intact despite interest rates rising and global uncertainty continuing to weigh on consumption, according to Kiwi Economics.
There were also positive numbers for tourism. The year ended June had the highest tourism numbers since 2019, which helped boost sales and traffic at local retailers.
Meanwhile, July’s “big boost in retail spending” was described as a “welcome bright spot for the struggling sector,” says Retail NZ.
Stats NZ’s July Electronic Card Transactions data shows a 3.5 per cent increase in actual core retail spending compared with July last year and follows a flat June when spending rose by just 0.4 per cent.
“The lift in spending in July is really encouraging for retailers, with the winter months generally slower for the sector,” says Retail NZ’s advocacy, advice and communications manager, Denise Garland.
“Falling fuel prices meant households had a little bit extra in their pockets, and we can see that Kiwis took that opportunity to treat themselves.”
Apparel sales rose by 2.5 per cent, the biggest year-on-year increase in at least two years, and it’s also the biggest bump in spending from June to July since 2020, said Garland.
The rise in hospitality spending in particular reflects the importance of events to retail.
“The men’s Fifa Football World Cup looks to have encouraged people out into bars and restaurants right around the motu. Events are hugely important to retail, because extra foot traffic in our town and city centres also means more people are out browsing in our high streets,” said Garland.
However, Retail NZ cautioned that it is not yet clear whether July’s figures represented a temporary spike thanks to a unique combination of circumstances, or is a sign of a broader, positive shift in consumer confidence.
“July was unique in that not only was there a major international sporting event for the first half of the month, but there was also a public holiday – Matariki – and there were five Fridays, which are typically the weekdays when we see the biggest spend in retail,” Garland concluded.
