New Zealand consumer spending was sluggish in the first three months of the year, indicating the economy remains weak.
First-quarter retail purchases on credit and debit cards rose 0.1% from the fourth quarter, when they declined 0.9%, Statistics New Zealand said Friday in Wellington.
New Zealand entered a double-dip recession in the second half of last year and subdued spending adds to risks that the contraction will extend into 2024 as high interest rates damp demand. The central bank this week acknowledged the economy is weak but said the inflation outlook requires it to keep policy restrictive for a sustained period.
“We expect households to remain cautious with regards to their spending over coming months, consistent with very low levels of consumer confidence,” said Darren Gibbs, senior economist at Westpac Banking Corp. in Auckland. “That’s likely to be compounded by a further softening in the labor market as businesses right-size their workforce to reflect a subdued economic outlook.”
Today’s data are not adjusted for inflation, suggesting the retail industry will detract from economic growth in the first quarter, Gibbs said.
Household debt-servicing costs neared a six-year high in 2023, adding to strains on spending. Separately, a report today showed manufacturing contracted in March for a 13th straight month.
Written by: Tracy Withers @Bloomberg
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