Household spend grows 0.9% to beat expectations

Household spending has bounced back to its early 2015 peak but the growth is expected to moderate for the rest of the year.

Statistics New Zealand figures released yesterday showed September electronic card spending grew by 0.9% in the month, well above market expectations of 0.4%. Annual growth reached 5.9%.

Core spending, which strips out fuel and vehicle spending, grew by 1.2% in the month, largely driven by a rise in durable spending (1.9%) and hospitality (1.5%). That gave an annual rise in core retail of 7.7%.

Durable spending is typically tied to new housing construction and house sales.

Spending on fuel fell as petrol prices declined in the month.

ASB senior economist Jane Turner said the data showed household spending remained healthy.

''Sharp falls in consumer confidence have moderated recently and dairy prices have lifted off their lows, reducing some of the negative headwinds to consumer spending.''

Interest rates remained at record lows and net migration at record highs, she said.

Combined with strong tourist inflows, support for spending growth would continue in the future.

However, consumer confidence remained low and the risk was of slowing economic growth spilling over into the labour market, putting downward pressure on spending growth.

''On balance, we expect spending growth to moderate over the remainder of 2015.''

Westpac senior economist Satish Ranchhod said the strength in durables spending might because households were rushing to purchase items before the fall in the New Zealand dollar pushed up prices.

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