Electronic card spending saw a modest increase in July, as falling fuel prices triggered a boost in discretionary spending. 

According to data from Bank of New Zealand (BNZ), card spending rose 1 per cent month-on-month in July, reversing a decline in June.

Fuel price declines played a big role in supporting discretionary spending. The hospitality and apparel sectors posted the strongest monthly gains of about 3 per cent, but remained about 2 per cent below February levels before the fuel price shock. 

“Stepping back, the uptrend in monthly card spend, now just over a year old, remains intact. But you certainly wouldn’t describe it as vigorous, particularly when viewed on a per-capita basis,” BNZ said.

“Spending as of July is only just getting within cooee of the peak back in August 2023. These data are simple dollar values. Adjusting for inflation produces an even flatter profile,” it added.

According to the bank, tourism spending has been an important prop for the retail sector, particularly in the South Island. Population growth is another important driver, but the lift in net migrant arrivals has flattened.

Overall, trends remain mixed and uneven, but are enough to support the idea that a shaky underlying recovery in spending activity continues.

BNZ warned that the positive impact of fuel price declines might not last long, given prices have been rising again more recently.

“Consumers also continue to face challenging conditions from high inflation, a tough jobs market, flat house prices, and rising mortgage rates, all of which are likely to stick around this year.

“Our view is thus that positive but sub-par consumer spending growth will remain a feature of the recovery until inflation and unemployment, in particular, start falling,” BNZ said.