Source: Radio New Zealand
File photo. 123RF
Households spending more than a third more on utility bills than they did a year ago do not have much money left for fun stuff, Kiwibank economists say.
They have released new spending data, which shows a tough end to the year for shops, particularly fashion retail.
“We typically see spending ramp up into the summer holidays,” economist Sabrina Delgado said.
“But our Kiwibank electronic card data showed this effect was less pronounced this time around. The silly season kicked off on a good note with the number of transactions in December up 0.4 percent on last year’s levels. But it seems consumer spending got hit with a bad new year’s hangover in January. The number of transactions in January dropped 2.7 percent below the overall 2025 monthly average. And compared to last January, transaction volumes were down 2.3 percent.”
The total amount spent was up 8.6 percent in December and 3.7 percent in January, which indicated people were shopping less but spending more.
The January data in particular showed that was because of higher prices, she said.
“Inflation has picked up over the past year, and many households are still feeling the squeeze after several years of tight budgets, elevated consumer prices, and expensive credit. So it’s no surprise we’re still seeing fewer shopping trips with more spent per trip.”
She said although interest rates were “significantly lower” than the year before, household budgets were still under pressure because the cost of essentials was rising.
They were spending 36 percent more on utilities across December and January than a year earlier.
“That’s taking a big chunk out of disposable incomes. It means that we have less to spend in other areas because utilities are essentials. We have to pay them.”
She said it was hitting clothing shops particularly hard, and spending on apparel seemed to be in persistent decline.
The data indicated that more of the same was happening in February, she said.
“Looking at the early data we have for February, which runs to just after Waitangi weekend, transaction volumes are currently tracking about 4.3 percent lower than this time last year. That suggests that the same kind of soft consumption we saw through January may be lingering into February. While this may be the case, we’ll flag that it may be too soon to draw firm conclusions for February. There’s still plenty of the month left, and a late-month pickup could shift the final outcome significantly.”
People seemed to be going out to dinner more but spending less at cafes, she said.
“We frequented our local coffee and brunch spots less than last year. And higher food prices seem to be hitting here the most. Because while the number of café visits has dropped, the dollars spent have instead risen. Compared with last summer, café spending is up almost 9 percent, meaning each visit is costing noticeably more. So for now it seems were gritting our teeth through our homemade instant coffees instead.”
Takeaway spending was also on a steady slide.
Demand for housing-related goods was strengthening. Trips to hardware stores were up 6 percent year-on-year in December and dollars spent were up just over 30 percent.
“Overall the lift in housing-related spend offers an encouraging sign for the housing market. The need for a fresh lick of paint or new furniture is often suggestive of increased housing market turnover. To us, the data signals that households are getting ready for a better year for the housing market. And we expect it will be with interest rates in their low ranges. “
Delgado said households were still worried about the labour market, which made people nervous about spending.
“Unemployment is at 5.4 percent. Even though we’ve seen the underlying details in the labour market showing some signs of strengthening, the average household only looks at that headline unemployment rate.
“If they see that that’s rising, that job insecurity weighs on that confidence to be splurging a bit more right now.”
She said it was also significant that the housing market was still soft because a lot of wealth was tied up in it.
“In our view, though, we do still see the rest of this year to be a recovery for consumption because as the broader economy is recovering, things like the labour market will improve. The housing market also is going to improve. And that should give a bit more confidence to households and their spending this year.”
She said any interest rate rises should still be left for 2027.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
