Electronic card transactions edge lower in February

Consumers are remaining cautious and are wary of buying durable items, electronic card transaction figures for February show.

Data published by Statistics New Zealand (SNZ) today showed the value of core retail transactions, which exclude vehicle-related industries, edged down a seasonally adjusted 0.2 percent compared to January, when it also slipped 0.2 percent.

The decline reflected flat or falling sales in all the core retail industries, except consumables such as food, liquor, and chemist retailing, which rose 0.8 percent, SNZ said.

The actual value of transactions in the core retail series was up 2.6 percent from February 2009.

For all the retail industries, seasonally adjusted electronic card transactions fell 0.4 percent, with a 1.3 percent fall in fuel retailing which had been the main contributor to rises in the series between August and January.

When non-retail industries were included, the total value of transactions dropped 0.3 percent. The non-retail industries, which include services such as travel and health, and wholesaling, dropped 1.3 percent in February.

It was the first drop in the total value of electronic card transactions in eight months, although in November no change was recorded.

Goldman Sachs JBWere economist Philip Borkin said spending on durables had declined for three consecutive months, falling 1.6 percent in February.

"Despite surveys reporting consumers feeling more confident towards the future, there is clearly a reluctance to turn this into actual spending decisions," Mr Borkin said.

Today's figures reinforced a cautious consumer outlook. He had expected a further recovery in consumer spending during the first half of 2010 supported by net migration and pent-up demand for durable items.

"While a recovery is under way, the underlying trend appears more subdued," Mr Borkin said.

ASB economist Christina Leung also pointed to the soft figures for spending on durables, saying they suggested households were continuing to hold off buying big ticket items.

Other areas of discretionary spending were also weak, with another decline in spending on apparel, partly offset by the rise in consumables.

The relationship between electronic card spending and retail sales was not particularly tight, but looking at the card trend for the past few months it appeared the recovery in household spending remained very gradual.

Deutsche Bank chief economist Darren Gibbs said he anticipated growth in consumer spending would gradually strengthen through the year, as a broader economic recovery began to be reflected in a stronger labour market. Some spending was also likely to be advanced ahead of a possible rise in GST later this year.

The main risk was a renewed loss of consumer confidence that could be associated with current low levels of housing market activity and flat or declining house prices as the process of deleveraging in the household sector continued.