Retail spending jumped $2.3b in May as shoppers returned to stores

Thursday, 11 June 2020

Displaced workers who have lost their jobs during Covid-19 are being offered free study to retrain for jobs in the agriculture industry.

Retail card spending bounced back by $2.3 billion in May as businesses re-opened after the Covid-19 level 4 lockdown, Statistics NZ has reported.

As well as rebounding strongly from April, card spending would have been up on May last year, had it not been for a continuing lull in spending on accommodation, takeaways and eating out.

“Spending on groceries, furniture, and appliances in May was even higher than the same month last year,' retail statistics manager Kathy Hicks said.

'But sales for hotels, motels, cafes, and restaurants remained well below typical levels.'

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

Some retailers benefited from a May 'bounce' as New Zealand move down alert levels.

The significant jump in retail spending in May was not unexpected, she said.

'The partial recovery was a direct result of more businesses re-opening after sales fell drastically when non-essential businesses closed under alert level 4 in April.”

Retail spending using electronic cards reached $5.2b in May, which was still down $332m, or 6 per cent, overall from May last year.

But spending on groceries and liquor was up $254m or 12 per cent on a year ago, and spending on 'consumer durables' which includes furniture, hardware, appliances, and recreational goods, was up $122m or 9 per cent.

Spending on eating out and hotels, motels, and other accommodation was down $428m or 41 per cent on last year during the month, some of which was spent at level 3 and some at level 2.

Fuel sales were also down $210m or 35 per cent due to a combination of decreased travel and lower petrol prices.

Westpac senior economist Satish Ranchhod said the 80 per cent bounce back from April exceeded its and other analysts' forecasts and signalled 'an encouraging degree of resilience in household spending appetites'.

But the bank assumed some of the recovery was due to 'pent up demand after the lockdown'.

'At least some of this will be 'catch-up spending' and it wouldn’t be surprising to see some easing back later in the year,' Ranchhod said.

The bank expected to see further rises in spending over the coming months, he said.

'However, we don’t expect a return to pre-Covid-19 levels for some time.

With May spending on liquor, groceries and durables up on last year, consumers seem to have shown an encouraging degree of 'resilience', a Westpac economist says.

'That’s due to factors including, job losses, increases in debt and general nervousness about the economic outlook, which will dampen spending appetites,' he said.

'Continuing border restrictions will also be a major drag on spending in areas like hospitality.'

Retail NZ chief executive Greg Harford said its members were reporting a big jump in spending relative to April, but that customers were seeking more value and 'trading down from luxury brands'.

They had also reported customers postponing the purchase of 'big ticket items', he said.

'There are different experiences being felt by different retailers.

'Some are feeling the pinch more than others.'

The May spending bounce could raise questions over whether the Government might have over-estimated how many businesses might qualify for the second tranche of its wage subsidy scheme, he agreed.

The Government has budgeted $3.2b for the extension of wage subsidies, on top of the $10.9b allocated so far.

But new criteria mean that only businesses that experience a 40 per cent revenue drop in a 30-day period during the 40 days immediately before they apply for the extension can qualify.

Harford said the feedback from Retail NZ's members was that about a quarter or a third expected to qualify for the extra help.

'That does the signal the deep hurt that is still going on in parts of the sector,' he said.