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A thrifty turnaround

Kiwis may be confident—but they’re not voting with their wallets

Market Metrics

The forecasts are for growth. The confidence surveys suggest we are about to spend. The early indications last year were that the turnaround had come. So why the lack of follow-through in January?

Sales through the Paymark electronic network—capturing around half of the national retail spend—were running a mere three percent above year-ago levels in the last couple of weeks of January; and that’s after a petrol price rise. Strip out the petrol stations and the annual sales growth rate was a measly one percent—not good, but even more disappointing given the weak base period.

Don’t lose heart, though. There are plenty of signs to indicate higher growth ahead. But the January results are a reminder that growth can be patchy, both in terms of place and time. And that petrol prices do matter.

Source: Paymark

It’s no coincidence that the higher petrol prices (a major component of the ‘because-we-have-to’ category shown) have eaten into the discretionary budget; it has happened before. This time, we are seeing less spending at ‘because-we-can’ outlets such as florists, tyre companies, optometrists and music retailers, and at ‘we-can-build-it’ outlets such as building suppliers and furniture stores. It hasn’t stopped us driving out for a bite to eat, mind you.

Early indications last year were that the turnaround had come. So why the lack of follow-through in January?

The patchy pattern to spending does create a challenge to retailers: on the one hand, growing demand implies a need to have key stock ready; but volatile spending patterns means over-stocking can easily occur, especially of non-core items. The result? There’s plenty of discounting to come yet.

Anthony Byett is an economist who consults to Paymark, New Zealand’s largest EFTPOS provider

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