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Here we go again

  • Opinion
  • March 14, 2019
  • Satish Ranchhod
Here we go again

Spending appetites are being supported by low interest rates, a firming in the housing market and increases in households’ disposable incomes. However, slower population growth means that overall spending levels aren’t likely to rise as quickly as they did in recent years.

Following rapid gains of 5 to 6 percent per annum through 2016 and 2017, annual nominal retail spending growth slowed to a more moderate pace of 4 percent over the past year. That slowdown came against a backdrop of a cooling housing market and a fall in consumer confidence, which saw many households putting away their wallets.

Looking ahead, another year of moderate growth is on the cards for the retail sector, with nominal spending levels set to rise by around 4 to 4.5 percent over 2019.

Among the factors continuing to support spending is the low level of borrowing rates. The back half of 2018 saw the Reserve Bank signal that, under its new dual mandate, it’s willing to tolerate a bit more of a pickup in inflation (at least temporarily) in order to shore up economic growth. Consistent with that change, we now expect the RBNZ will keep the Official Cash Rate on hold through to November 2020 – a longer pause than we previously anticipated. The resulting falls in mortgage rates have seen the housing market firming again and have boosted spending appetites, particularly for furnishings and other durable household items.

A strengthening outlook for household incomes is also helping to support spending appetites. With the economy in good shape, employment has been rising. And looking to the next few years, we expect that unemployment will remain low, at rates close to 4 percent. At the same time, wage growth has started to pick up, and it’s set to rise even further over the next few years.

But while the above factors will help to bolster households’ spending appetites, growth in overall spending levels is being restrained by a changing outlook for net migration and population growth. In recent years, the combination of strong inflows from other countries and low departures of New Zealand citizens saw population growth soaring to rates of over 2 percent per annum. That provided a powerful boost to spending levels. It also played an important role in helping businesses source skilled labour.

However, while net migration is still elevated, new arrivals into the country have levelled off and many of those who arrived in recent years are now returning home. Those developments have seen net migration trending down since mid-2017, and we expect it will continue falling over the next few years. Just as the earlier run up in migration provided a boost to demand in previous years, the slowdown now in train will be a drag, moderating an ‘easy’ source of demand growth that many businesses have been enjoying.

Putting the above factors together leaves us with a picture of continuing, but moderate spending growth over the coming year. But at the same time, many retailers will find themselves wrestling with rising costs, particularly with regards to wages. Base wage rates in the retail sector rose by 2.2 percent over the past year - the fastest pace of increase we’ve seen since the financial crisis. We expect that wage rates in the retail sector will continue to push higher over the coming year, in part due to the planned $1.20/hour increase in the minimum wage scheduled for April.

On top of that, competitive pressures in the retail sector remain strong, with continued growth in online trading and other ecommerce developments driving changes in business models. That’s limiting the ability of retailers to push up prices and means that scope to expand margins is likely to remain limited for some time.

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InStyle names All Is For All’s Grace Stratton a ‘Badass Woman’

  • News
  • July 18, 2019
  • The Register team
InStyle names All Is For All’s Grace Stratton a ‘Badass Woman’

Grace Stratton, the 20-year-old founder of specialty ecommerce site All Is For All, has been named one of 50 global Badass Women by US glossy magazine InStyle. The list includes international celebrities like Mindy Kaling and businesspeople like Stitch Fix chief executive Katrina Lake.

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Wellbeing in the workplace: Here's how its affecting your staff, and your bottom line

  • Opinion
  • July 18, 2019
  • Elly Strang
Wellbeing in the workplace: Here's how its affecting your staff, and your bottom line

Idealog editor Elly Strang recently spoke at the Magazine Publishers Association conference about the importance of wellbeing in the workplace, and the key takeaways from Wellness Month. She shares why it shouldn't be thought of as a luxury nice-to-have, like yoga classes, as research is showing it impacts on your bottom line, as well as some tips on how to create change in the workplace.

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How HomeAR is incorporating AR into architecture design

  • technology
  • July 18, 2019
  • Courtney Devereux
How HomeAR is incorporating AR into architecture design

Many people struggle to envision plans from simple 2D renders and floor plans, as without a designer's eye, filling in blanks from imagination isn’t the most reliable method when it comes to something as important as building a brand-new home or store. Reactar has launched an augmented reality-based platform, HomeAR, to counteract this, which allows users to see and engage with homes in a virtual way, making the very personal process more reliable.

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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.

 
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Simon West is the new chief executive of Torpedo7

  • Who's Where
  • July 18, 2019
Simon West is the new chief executive of Torpedo7

Simon West, who has 20 years' experience leading companies like Ezibuy, has been appointed the chief executive of The Warehouse Group's outdoor retailer Torpedo7.

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Bay of Plenty D2C Saltysea opens its first store

  • Design
  • July 17, 2019
  • Sarah Dunn
Bay of Plenty D2C Saltysea opens its first store

Stephanie Saxton has been selling cheeky swimsuits and ethical activewear online out of Bay of Plenty's Athenree since 2018. She's now opened Saltysea's first bricks and mortar store, the Salty Collective.

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What the investment community thinks Kiwi businesses lead on the world stage with

  • News
  • July 16, 2019
  • Idealog
What the investment community thinks Kiwi businesses lead on the world stage with

Every business goes through a life cycle: start-up, growth, maturity and renewal, rebirth or decline. Once you’ve made it past the juicy, creative ideation stage and into the growth and maturity stage, the time for many comes to seek investment. But what do investors look for beyond a commercial return? And what do investors think New Zealand companies excel at when compared to our neighbouring countries around the world? Executive director of the Angel Association of New Zealand Suse Reynolds shares her top tips for those who are looking for investment.

Read more
 
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