Hospitality and consumables drive card spending

New Zealand retail spending on credit and debit cards rose in April, as gains in hospitality and consumables offset falling apparel purchases, which reflected warmer than normal April weather.

Forsyth Barr broker Suzanne Kinnaird said an accelerating economy continued to underpin household confidence.

However, apparel, a key sector for the New Zealand-listed retailers, had been one of the weakest segments in the retail sector over the past two years, she said.

The warmer April weather was unfavourable for winter fashion sales. The nationwide average temperature was 14.5degC in April, about 1degC above the recorded 1971-2000 average, she said.

Hospitality continued its strong run in April, up 11% on the previous corresponding period.

The sector had outperformed core retail for the past 15 consecutive months.

Consumables were up 6% in April, outperforming core retail for the first time in 12 months.

''The New Zealand consumer economy continues to show gradual positive momentum, although most retailers are still cautious on the outlook.''

Consumer confidence was also showing positive signs, Ms Kinnaird said.

Westpac senior economist Michael Gordon said a standard seasonal adjustment programme could cope with the shifting timing of Easter. While Anzac Day was not explicitly accounted for, it was a regular part of the April landscape.

''What's harder to compensate for is the potential interaction between the two holidays when they fall in the same week, as they did this year.

Some people effectively treated this as a week-long break, which may have temporarily depressed the level of activity.

''So there's a risk we see a string of soft activity numbers for April, but we'll need to withhold judgement until we see the May figures.''

However, the soft card spending figures for April were hardly against the recent run of play, he said.

The monthly pace of household spending had clearly flattened since the start of this year - not coincidentally, at the same time the pace of house price inflation had cooled, Mr Gordon said.

Statistics New Zealand figures showed the value of retail spending on electronic cards, seasonally adjusted, rose 0.3% to $4.59 billion in April. Spending on hospitality rose for a ninth month, up 0.3% to $723 million, and up 11% from a year earlier.

Spending on consumables, such as food and liquor, rose for a third month, up 0.7% to $1.6 billion. Apparel purchases fell 2.7% to a two-year low $277 million. Spending on durables, including furniture, hardware and appliances, fell 0.2% to $1.09 billion in April.

The figures showed fuel spending rose 1.5% to $742 million, snapping three consecutive months of decline, while vehicle purchases dropped 3.5% to $129 million.

Ms Kinnaird said her preferred picks in the retail sector were Michael Hill International and Restaurant Brands, with an outperform rating.

Forsyth Barr also had an outperform rating on Pumpkin Patch and Hallenstein Glasson, but both companies had a high risk rating to reflect the near-term risks involved.

 

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