Takeaways are up—tyres are down
Spending is up. At least, it is in aggregate and it is in recent months—and it’s more than just an adjustment for higher GST. But spending growth is not happening every week and is not happening in every sector, which suggests that households remain financially constrained or spendthrift.
Last year was a tough year. Strip out card usage at petrol stations and supermarkets—a core part of non-discretionary spending—and we used our electronic cards 4.0 percent more in 2010 in the rest of the outlets. That translated into 1.3 percent more dollars spent—less than the rate of inflation.
However, by the end of the year these growth rates were running at 4.9 percent and 2.7 percent respectively—not much of a jump, but a pick-up nonetheless. Look more closely, and the increased spending came among the food takeaways and restaurants/cafes.
And while we’re slowly coming round to spending more on our houses, we are not increasing our spending at the likes of tyre shops, chemists, florists, optometrists and motels. In other words, we are finding a little extra money to spend—but we’re being discerning.
But that’s only part of the story for retailers. There is also the impact of new technology, which is noticeable as declining sales for video, music and photography outlets. And invariably, firms come and go. The impact will vary by sector but, in total, terminal connections to Paymark that had existed 12 months earlier contributed less than half of the spending increase this December— that’s not leaving much gain for the encumbents.
The lesson to take from 2010? Don’t sit back and wait for the customer to suddenly spend more.
Anthony Byett is an economist who consults to Paymark, New Zealand’s largest Eftpos provider