Think the economic recovery is nearly here? Not so fast

Friday, 12 June 2026

Spending at Christchurch cafes, restaurants, bars and takeaways fell in the March quarter, with transactions down 7.1%.

ANALYSIS: New Zealanders waiting for economic relief may have to keep waiting as repeated global shocks continue to drive up costs faster than any recovery can take hold.

Westpac chief economist Kelly Eckhold said the conflict involving Iran, which began just over 100 days ago and has disrupted shipping around the Strait of Hormuz, was the latest example.

If that disruption drags on until Christmas, competition for available fuel inventories could become more fierce, he said.

Higher fuel prices are one of the latest risks to household budgets and business costs.

“If it’s still closed at day 300, which is Christmas Day, the experts in the industry are saying there will be even more competition for available inventories. That’s where it might get a bit tougher,” Eckhold said.

Eckhold said the economy was now being hit by repeated supply shocks – events that push prices up and slow the economy down.

In the past, those shocks were often treated as temporary. Now, he said, businesses and households may have to expect “a whole string of them”.

Despite people spending the same number of dollars, inflation means the many are actually going backwards.

A string of shocks

That can mean a stop-start recovery, where each new shock pushes up costs before households and businesses feel the benefit of the last improvement.

Covid was followed by Russia’s invasion of Ukraine, then tariffs, now conflict in Iran and significant disruption to global energy markets.

Westpac chief economist Kelly Eckhold says households may not be able to rely on cheaper debt and rising house values to get ahead in the same way they did before 2022.

“Up until March, it probably was right to say people were starting to get a bit further ahead because the real value of spending was starting to lift. People were actually getting more stuff,” Eckhold said.

“It looks to us more like nominal spending has stalled,” he said, meaning people are spending about the same number of dollars. “And because there has been considerable inflation, that means people are going backwards.”

This can happen even if parts of the economy are doing well, creating a situation where jobs can be added, firms can stay busy, but households and businesses pay more just to stand still.

Canterbury holds up, unevenly

Even in Canterbury, where the economy is outperforming much of the country, Christchurch shoppers are making fewer purchases as household budgets tighten.

This is the case even in Canterbury, a region outperforming much of the country.

The latest economic data shows Canterbury’s economy grew 1.2% in the year to March, compared with 0.4% nationally. Unemployment in Canterbury was 4.4%, below the national rate of 5.7%, while manufacturing, tourism and parts of the primary sector continued to support the region.

But just because the regional economy is growing, it does not mean everyone is getting ahead, especially consumers.

Westpac chief economist Kelly Eckhold says repeated global shocks are making the recovery harder to predict.

In Christchurch, retail spending rose 0.5% by value in the March quarter, but transaction volumes fell 2.6%. That means more dollars went through the tills, but fewer purchases were made.

The squeeze was sharper in cafes, restaurants, bars and takeaways, where spending value fell 5% and transactions fell 7.1%.

Canterbury consumer confidence is also weak, falling to 90.6 from 93.1 in December and sitting below its 10-year average. A score below 100 means pessimists outnumber optimists.

Eckhold said households had less money left over after the basics, which made them more selective.

“There are fewer discretionary dollars around, and I don’t think it really matters where you are. Therefore people are more discerning when spending the discretionary dollar that they do have,” he said.

Businesses may have to sell into a wider range of markets to help create a buffer against being exposed to a succession of significant economic shocks.

But not every business and sector is struggling, with some companies doing well, especially where customers believe they are getting clear value for money.

“Good operators that are perceived to be offering better value for money are still doing OK. But if you’re more marginal, then there’s not much activity at all.”

The end of easy wealth

Eckhold said the shift could also change how households think about wealth.

“One of the big defining things of New Zealand in the last 20 or 30 years, up until probably 2022, was that asset prices rose fairly consistently,” he said.

That helped many homeowners feel wealthier and supported spending.

But Eckhold said households probably should not expect the same pattern, and people would have to get ahead through income and savings, rather than relying on cheaper debt and rising house values.

So for the coming months, Eckhold said households and businesses have to think more about resilience.

For businesses, that can mean carrying more stock, finding extra suppliers, paying more to secure freight, or selling into a wider range of markets so they are less exposed. For households, it means trying to keep more money aside, spending more carefully, and taking fewer financial risks.

The recovery may still come, but it may feel less like a return to easy conditions and more like learning to live with the next shock always somewhere in the background.