Spending intentions on the rise, survey suggests

Monday, 12 October 2020

Kiwis are getting over the fear of economic gloom, a survey of personal spending plans suggests.

The post-lockdown spending boom is set to continue as consumers get more comfortable about their futures, according to a new survey.

Conducted by independent economist Tony Alexander, the survey of more than 1300 people shows a net 32 per cent planned to increase their spending over the next three to six months.

It tallies with electronic card spending statistics which took a dive in August as Auckland returned to lockdown, but were up 11 per cent in July year on year.

Tony Alexander says spending plans are strong particularly for domestic travel and home improvement, but hospitality could also see a rebound soon.

Alexander said 32 per cent was quite a jump from just 13 per cent in his September survey, 19 per cent in August and 7 per cent in July and June.

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Asked whether Covid-19 has made them better or worse off financially, 694 respondents replied ‘’no change,’’ 325 were worse off and 324 better off – a ''net zero impact.'

Terence Harpur says business centres reliant on office workers are still waiting for their rebound.

The survey backed many other indicators showing the economy was facing far better prospects than was the case six or seven months ago, Alexander said.

''People have indicated they are feeling much more positive about the future, are feeling wealthier, and expect higher business profits, hours of work, and wage income.’’

The key reason people gave for splashing some cash was that they were saving money from not travelling overseas.

This was great news for the domestic tourism sector, since Kiwis typically spent about $10 billion when they travelled overseas, Alexander said.

Domestic travel, home renovations, and gardening remain the most favoured spending areas, with 42 per cent saying they would spend more on domestic travel.

Renovations were on the radar for 34 per cent of respondents, gardening was at 20 per cent and 11 per cent planned to spend more on investment property.

The biggest turnaround had been for eating out. A net 9 per cent had planned to spend more dining out, up from minus-9 per cent in September, which Alexander said was ''very good news'' for the hospitality sector.

Those who planned to cut their spending were either satisfied with what they had (a gross 26 per cent), wanted to get debt down (10 per cent) or were worried for the future (10 per cent).

Only 4 per cent cited expectations of lower work income.

Alexander said the overall optimism perhaps reflected the combined effects of reduced interest rates, lower worries about income loss, and better hopes for the future generally.

Sharemarkets had soared and the housing market had resurged on an even stronger trajectory since Covid-19.

In the home improvement sector, business owner Joseph McLean, of Auckland Landscaping, said work had been steady for his small business.

The property market has failed to cool, aided by low interest rates and a flush of first home buyers.

People had not explicitly been saying lockdown had shifted their appreciation for their home ''but you get the feeling that is the reason that they've gone ahead''.

However, retailers and restaurants in office areas were still reporting sluggish sales.

Terence Harpur, general manager of Takapuna Beach Business Association, said retail sales in his area were still down about 12 per cent overall last week, a group which had 135 hospitality and 230 general retailers.

Certain categories such as clothing and home or recreation were doing better. ''It kind of depends what it is.’’

However, he was hearing that surburban businesses were doing well, and tech businesses, lawyers and accountants seemed to be ticking along.

''Anyone who can work from home and a computer are fine but it's those face-to-face businesses which are still finding it a bit tough.''

He was hoping for better now that Auckland had dropped to Level 1 and office workers could return.

''Lunchtime hospitality, general retail, sale shops, that sort of stuff that relies on those Monday to Friday workers.''

Andrew Bruce, president of the Auckland Property Investors Association, said unspent cash was not the only reason why people were clamouring to buy shares and property.

He did know some people who had unexpectedly plunged into shares, but it was because of their bank deposits were getting such low returns.

He had also surprised himself by buying a couple of properties since the start of the year.

''If you'd asked me at the beginning of the year, if we would buy what we bought, I would have said no.''

However, the reason he had bought was because of the Reserve Bank's quantitative easing which had both underpinned low interest rates and created a flood of money looking for a home, making property attractive.

Bruce said he had also surprised himself by buying new, off the plan properties rather than his usual fixer uppers, to attract ''a slightly different type'' of tenant in view of upcoming changes to tenancy rules.