Close
 

Spending growth stays solid

  • Opinion
  • May 12, 2016
  • Satish Ranchhod
Spending growth stays solid

Strong population growth, increases in households’ purchasing power, and an influx of international tourists will all support spending.

However, spending is likely to be uneven across the economy, with major metropolitan centres growing at a faster pace than rural regions. In addition, the global economy has gotten a lot frostier and is weighing on conditions here in New Zealand.

There was a solid growth in retail sales in 2015. Adjusting for price changes, spending volumes were up 5.3 percent over the year and that strength has continued into early 2016.

We expect that spending growth will remain firm over the remainder of this year. There are three key reasons for this.

First, we’re seeing strong growth in households’ real spending power. Employment in the economy is continuing to expand, albeit at a gradual pace. On top of this, low petrol prices and softness in consumer prices more generally means that households’ earnings have been stretching further. In fact, adjusting for changes in the cost of living, wage growth is around a 15-year high! On top of this, borrowing rates are at some of their lowest levels in decades. These conditions have been putting a considerable amount of cash back into consumers’ wallets.

Reinforcing the increases in households’ spending power has been strong growth in the economy’s demand base, with the population currently growing at its fastest pace since the 1970s. In large part, this is due to record levels of net migration. Over the past year, there was a net inflow of 65,000 people - around 50 percent higher than the peak seen in the early 2000s. This has been a result of fewer New Zealanders leaving and more returning from overseas. Migration levels have also been boosted by a pick up in the number of new arrivals, including growing numbers of international students.

The third factor boosting retail spending has been the influx of international tourists, which we expect to continue in the near term. Visitor numbers rose nearly 10 percent to a record three million last year. In addition, those in the industry report very strong bookings for the coming year and that the industry has grown to the point where capacity constraints are becoming a genuine issue.

Combined, the above factors signal a supportive environment for overall retail sales in the economy. However, it’s likely that we’ll see the strength of spending vary considerably across regions.

Strength in demand is expected to be centred on major urban areas, which are experiencing stronger population growth and where employment prospects are more favourable. There’s a particularly positive outlook for Auckland, where a strong outlook for residential construction is likely to boost to spending in areas such as household furnishings.

In contrast, demand conditions are likely to be weaker in many rural centres. Businesses in rural regions are already reporting softer spending as weakness in commodity prices (particularly for dairy) dampens incomes. Such pressure is likely to become more pronounced over the coming year, with global conditions pointing to continued downward pressure on commodity prices. Population growth is also likely to be more limited in rural regions.

One area of uncertainty for retail conditions in New Zealand is what’s happening offshore. The outlook for global trade has deteriorated in recent months, signalling strong headwinds for economies such as China and emerging markets, which are key markets for New Zealand exporters and importers. While this signals that softness in prices of many goods will continue for some time, it also points to a number of challenges. In particular, weakness in global trade and economic conditions adds to the risk that we’ll see confidence among New Zealand households and businesses falling, with associated downside risk for employment and spending. Furthermore, a rocky global environment may mean that New Zealand is facing a tougher time in terms of financial conditions, with higher costs for borrowing and tighter access to credit. 

This story originally appeared in NZRetail magazine issue 743 April / May 2016

​ ​

This is a community discussion forum. Comment is free but please respect our rules:

  1. Don’t be abusive or use sweary type words
  2. Don’t break the law: libel, slander and defamatory comments are forbidden
  3. Don’t resort to name-calling, mean-spiritedness, or slagging off
  4. Don’t pretend to be someone else.

If we find you doing these things, your comments will be edited without recourse and you may be asked to go away and reconsider your actions.
We respect the right to free speech and anonymous comments. Don’t abuse the privilege.

 
News

Idealog + Studio ZQ launch Wool-ovation competition: Enter now

Idealog is one of the few media brands dedicated to celebrating New Zealand’s special brand of creativity. We've teamed up with the New Zealand Merino ...

 
 

Sharesies investment platform joins the NZX

  • News
  • June 25, 2019
  • Courtney Devereux
Sharesies investment platform joins the NZX

Investment growth platform Sharesies has had a busy year in 2019, becoming B Corp certified earlier in April, and now has become an NZX participant starting this July.

Read more
 
 
News

Capitalise on today and invest in tomorrow at the Retail NZ Summit and SME Forum

New Zealand’s leading retail trade organization, Retail NZ, works year-round to assist its members with retail advice, benefits, industry intel and education. This July it’s ...

 

Social scoreboard

Zavy and The Register have worked together to create a scoreboard that compares how the top 25 traditional media advertising spenders in New Zealand have performed on social media over the past 30 days, updated in real time.

 
topics
Regional rollercoaster
What does retail look like in 2019 for ...
Concept to closet
Business coverage of New Zealand Fashion Week.
Town centres
A positive retail environment over the past 12 ...
Amazon Arrival
Keeping up with all things Amazon as it ...
The Retail Yearbook 2017
As we battle our way through the busiest ...
Hospitality enhancing retail
Some think food and integrated hospitality offerings will ...
The future is bright
We spoke with four retailers in their twenties ...
Spotlight on signage
At first glance, the humble in-store sign might ...
Red Awards 2016
The Red Awards for retail interior design celebrate ...
Auckland Unitary Plan
Auckland is changing. The Unitary Plan will decide ...
How to open a store
Sarah Dunn considers what it would take to ...
All things to all people
Kiwi retailers share their omnichannel strategies.
Rising stars
Retail's top young achievers.
Delivering on your promises
The sale isn't over until your item is ...
Retail in heartland New Zealand
Retailers keep the regions pumping, but how strong ...
Sisterhood
Women in retail help one another. We spoke ...
The changing face of retail
Shifting demographics are creating big changes in New ...
The retail yearbook
With the help of experts in the retail ...
Retail rogues
We put the spotlight on staff training. Jai ...
Here come the giants
Topshop has arrived in Auckland’s CBD, David Jones ...
From retail to e-tail
Ecommerce has become part of the way mainstream ...
Window shopping: A spotlight on social media
Sarah Dunn and Elly Strang look at how ...
Loyalty in the digital age
How are retailers maintaining loyalty? Sarah Dunn, Elly ...
The Innovators | In partnership with Spark Business
Technology is rapidly changing the retail industry as ...
 
News

Ambiente: A window on the world

Global forces like Brexit and climate change are affecting trade worldwide. Sarah Dunn consults the Ambiente trade fair in Germany for evidence of how this ...

 
 

Sephora beauty bus to tour New Zealand ahead of store launch

  • News
  • June 24, 2019
  • Emily Bell
Sephora beauty bus to tour New Zealand ahead of store launch

If you hadn’t already heard, global beauty giant Sephora is coming to Auckland this July. Founded in France by Dominique Mandonnaud in 1970 and owned by luxury goods group LVMH Moët Hennessy Louis Vuitto, Sephora has since become a leading beauty pioneer, community and trailblazer in the industry, to say the least.

Read more
 

Pottery Barn hits the New Zealand market through Ballantynes

  • News
  • June 21, 2019
  • Sarah Dunn
Pottery Barn hits the New Zealand market through Ballantynes

Heritage Canterbury department store Ballantynes is introducing the US brands Pottery Barn, Pottery Barn Kids and West Elm to the Kiwi market through a New Zealand exclusive partnership with Williams-Sonoma.

Read more
 
Next page
Results for
Topics
Jobs
About us.

The Register provides essential industry news and intelligence, updated daily. And the digital newsletter delivers the latest news to your inbox twice a week — for free!

©2009–2015 Tangible Media. All rights reserved.
Use of this site constitutes acceptance of our Privacy policy.

Advertise
The Register

editor@theregister.co.nz

Content marketing/advertising? Email anita.hayhoe@icg.co.nz or call 022 639 3004

View Media Kit

}