Stores are facing a tough time ahead because people are not spending as much money, according to recent data. The latest information from Stats NZ shows that in February, spending using electronic cards dropped by 1.8% compared to the previous month and was 2.5% lower than the same time last year.
Almost all categories saw declines, especially in fuel, consumables (food and drink), and durables (like appliances, electronics, furniture, and clothing). The ANZ Truckometer, which measures road activity as an economic indicator, showed a rise in light and heavy traffic indices, suggesting increased economic activity.
However, ANZ chief economist Sharon Zollner mentioned that the overall Truckometer reading, when adjusted for population growth, was lower. Recent migration data indicated a significant population gain, affecting the Truckometer’s per capita readings.
Retailers are struggling to make a profit due to slim profit margins, with some businesses closing down. Retail NZ chief executive Carolyn Young mentioned that although there is foot traffic in stores, converting it into sales is challenging. Customers with loyalty cards are inundated with constant sales offers.
Young explained that 2024 is expected to be challenging, even if the Reserve Bank reduces interest rates. She further stated that any positive effects from interest rate reductions will take time to reach consumers.
With businesses shutting down, more individuals will likely have less money due to potential job losses. The situation is undoubtedly challenging.