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Consumers are in retreat; that should be enough to convince the RBNZ it doesn't need to raise interest rates next week.
The New Zealand dollar is softer across the board on the day retail card spending data from New Zealand shows consumers are turning increasingly cautious, with overall spending falling in April.
According to official aggregated electronic card spending data, retail spending declined 1.3% in April, down from a positive 0.7% in March, and undershooting expectations for +1.2%.
Core monthly spending slumped to -1.3%, down from -0.3% previously. Households reduced spending across all store types.
"This was a much weaker outcome than we had expected," says Darren Gibbs, Senior Economist for NZ at Westpac.
For the Reserve Bank of New Zealand (RBNZ) this data is important as it suggests consumer demand has declined sharply, which limits the extent to which inflation will rise in the coming months.
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In short, that reduces the odds of a rate hike at the RBNZ next week and in the near future.
"There’s a lot of pain in the economy right now. And interest rate hikes are not what we need given the pressure businesses are facing," says a note from Kiwibank released Tuesday.
For the NZ dollar, reduced odds of a rate hike are a headwind: the pound-New Zealand dollar exchange rate rises to 2.2893 on Tuesday. The New Zealand-U.S. dollar rate is lower by a third of a per cent at 0.5855.
"Looking ahead, the decline in retail fuel prices through May should have provided some relief to households. But relative to pre-conflict levels, for the foreseeable future, fuel prices will continue to siphon money out of households’ pockets," says Gibbs.
He adds that signs of slowing activity in the housing market may weigh further on spending on durables over coming months.
"And over time, weak global consumer confidence and increased travel costs will also likely weigh on the strong growth in tourist arrivals that has helped the hospitality sector to weather a time of subdued domestic spending."
