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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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Diversity in fashion: Size matters

  • News
  • September 9, 2019
  • Hemma Vara
Diversity in fashion: Size matters

We talk to Meagan Kerr, body positivity advocate and blogger at This is Meagan Kerr about how retailers can do better to cater to customers of all sizes.

Read more
 
 

Quality over quantity

  • Sponsored content
  • September 6, 2019
  • Sponsored content
Quality over quantity

These days when you hear the words, ‘marketing’, ‘leads’, ‘websites’, ‘social media’ and so on, it’s easy to wonder what to focus on. Add to that, the saturation of industry experts, all claiming to deliver a complete suite of solutions and it can become overwhelming. At our marketing agency, we recognise the need to create clarity in your decision making! We’ve put together three simple steps to help you find your perfect marketing partner.

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Millers celebrate their 95 year anniversary

  • News
  • September 6, 2019
  • Sponsored content
Millers celebrate their 95 year anniversary

Proud to be family owned and established in the South Island, Millers is a household name that provides the very best in curtains, blinds and accessories to a loyal customer base that only continues to grow. As their 95th birthday fast approaches, there’s never been a better time to reflect on their triumphant past…

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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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How Auckland International Airport’s Departure Experience redesign draws from the past, while adapting to the future

  • Design
  • September 5, 2019
  • Findlay Buchanan
How Auckland International Airport’s Departure Experience redesign draws from the past, while adapting to the future

Auckland Airport’s International Departure Experience redesign hopes to build for the passenger journey, represent our cultural identity, and become a blueprint for modern airport design. The project was completed in November and has been fronted by architecture firms Jasmax and Gensler. It has doubled the size of the retail and dwell component tied together by the overarching design narrative: a journey from sea to the sky. Findlay Buchanan chats about the new design with Jasmax architect and principal Nick Moyes, Gensler senior associate architect John MacKenzie and the artist behind the mana whenua narratives, Johnson Witehira.

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  • Sponsored content
  • September 5, 2019
  • The Real Media Collective
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EziBuy, Briscoes, Farmer’s, Ray White, Supercheap Auto and OOBE took home top honors at the Real Media Awards, recognised for their excellence in campaign and retail marketing.

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