Hard times in the city and it’s a mixed bag at grassroots level
Two years ago, the global financial crisis hit. One year ago, spending was on the increase and people were thinking their situation would soon improve. Today, people are still, on balance, reporting that they are financially worse off. There remains optimism about the future and that forthcoming tax cuts will improve many household budgets, but spending patterns through the Paymark electronic network indicate times remain tough.
We are spending more at petrol stations and supermarkets, and at cafes and takeaways. But spending at the dentist and optometrist has been cut back. We are buying up furniture and appliances, presumably to beat the GST hike rather than for increased housing needs, as we are cutting back at carpet outlets and building suppliers. We are using our debit cards more but not our credit cards. Exclude spending at petrol stations and supermarkets and Paymark electronic transactions were up a mere 0.6 percent between July 2009 and July 2010, weaker growth than a year ago.
Spending growth is noticeably low in the major cities. Conversely, spending is increasing faster in the likes of Otago, South Canterbury and West Coast, suggestive of a grassroots recovery. However, the heartland story is inconsistent: July spending growth is above the national average in the dairy-intensive Waikato but below average in Taranaki; spending actually declined in Hawkes Bay and Marlborough.
The reality is that budgets remain tight everywhere. Spending is increasing and improved conditions in some core primary industries bode well for growth ahead. But tight stock control will remain a priority for retailers in the Christmas shopping season.
Anthony Byett is an economist who consults to Paymark, New Zealand’s largest Eftpos provider