Coronavirus: Pent-up shopping spree may be brief after lockdown lifts: ASB

Thursday, 9 April 2020

Retailers relying on pent-up demand after New Zealand's Covid-19 lockdown ends might be hoping for too much.

Electronic card spending in March shows panic-buying saw Kiwis spent $376 million more on groceries than they did in the previous month, an increase of 17 per cent.

But the opposite was true for travel (down 53 per cent), food and beverages (27 per cent) accommodation (down 32 per cent) and clothing (down 32 per cent).

Travel sales fell 53 per cent in March, as border and movement restrictions came into play.

Mark Smith, an ASB senior economist, said that the 3.9 per cent fall in March's overall retail spending was worse than expected, and high unemployment might curb shoppers' impulses when retail returned.

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'Despite policymakers throwing in the kitchen sink to cushion the household sector, a retail spend-up after the end of the lockdown from pent up demand may be muted as households remain cautious with an eye on the weaker economic prospects ahead.'

Statistics New Zealand's figures out on Thursday gave more detailed information about spending so that the impact of Covid-19 on consumer spending was easier to see.

Panic buying pushed grocery spending up 17 per cent on the previous month.

It shows that travel spending, usually part of a wider non-retail category, plunged by 53 per cent in March, its biggest fall on record.

Overall card spending, both retail and non-retail, was down 8.7 per cent compared with a 0.4 percent rise in February.

On the retail side, sales totalled $5.7 billion, $231m or 3.9 per cent lower than February, and down 1.8 per cent on a year earlier.

The winners were grocers and supermarkets, up 17 per cent or $376m on February as shoppers hit food shops to stock up for the lockdown.

Social distancing at Pak N Save in Royal Oak, Auckland.

But elsewhere, retail card spending fell across the board, from clothes to fuel. Excluding groceries, it was down 17 per cent in the month.

Hospitality spending fell 30 per cent or $338m, as border closures and later movement restrictions saw tourist numbers dry up.

Sales of clothes and shoes fell $98m and furniture, hardware, and appliances (durables) sales were down $57m (3.9 per cent).

Fuel spending is also well down, thanks to driving restrictions and a drop in fuel prices, falling $113m or 19 per cent in March.

This is echoed in Z Energy's weekly fuel updates, which show demand for 91 and 95 Octane at its retail outlets have slumped from 15,185,786 litres in a normal week to just over 3 million litres last week.

Excluding vehicle-related industries, core retail spending dropped 1.5 percent in March, more than reversing a 0.7 per cent rise the previous month.

ANZ senior economist Liz Kendall said spending will have plunged further since then.

'Once Covid-19 restrictions start to be lifted, we are likely to see an initial bounce. But in trend terms, spending will remain weak for some time, with the recovery slow.'

Kendall said New Zealand was making good progress in combating the spread of the virus, but returning to normal would not be straightforward.

'Easing in restrictions will perhaps be gradual or delayed to reduce risks of a renewed outbreak. We expect to see an initial bounce in retail spending on the back of pent-up demand, but it will return to a much lower trend overall.

'Unemployment is surging, households are experiencing financial pressure, and uncertainty will remain ubiquitous, especially since renewed outbreak will remain a risk.

'A period of de-leveraging is likely as the economy rebuilds and demand will be weak for quite some time.'

Card spending, consumables (March month, Statistics NZ):

* Supermarket and grocery stores up 18 per cent ($315m)

* Liquor up 15 per cent ($25m)

* Specialised food retailing up 0.5 per cent ($1.1m).

Durables:

* Department stores down 6.9 per cent ($23m)

* Recreational goods down 6.9 percent ($10m)

* Pharmaceutical, cosmetic, and toiletry goods, stationery goods, and other store-based retailing down 1.1 percent ($3.8m)

* Furniture, electrical, and hardware down 0.2 per cent ($1m).

Other non-retail:

* Medical and other care services down 19 per cent ($46m)

* Postal and courier pick-up and delivery services fell 11 per cent ($7.4m)