N.Z. Consumer Spending Shows Signs of Resilience Despite Fuel Price Volatility

The New Zealand consumer is showing signs of resilience after a wobble in spending earlier this year. According to Bank of New Zealand's (BNZ) analysis, electronic card spending rebounded in July, with a 1% month-on-month increase following the previous decline. This growth was largely driven by declining fuel prices, which breathed life into discretionary spending categories such as hospitality and apparel.

However, while the uptrend in monthly card spend remains intact, it's not exactly vigorous, particularly when adjusted for inflation. Spending is still below pre-fuel price shock levels in February, but BNZ's data suggests that consumers are slowly getting back on track.

The Performance of Services (PSI) Index also showed a mixed picture, with the headline index holding above 50, indicating expansion, but some subcomponents remaining below this threshold. The trend in migration is looking flatter, with net migrant arrivals revised down to 17,600 per annum, and fuel price volatility continues to cast a pall over the outlook.

Despite these challenges, BNZ's view is that positive but sub-par consumer spending growth will remain a feature of the recovery until inflation and unemployment start falling. The 'misery index', a combination of annual inflation at 4.1% and the unemployment rate at 5.6%, currently yields an uncomfortable 9.7%, but this is expected to peak in the coming months, providing some relief for consumers.