New Zealand’s Consumer Spending Decline Suggests Shrinking Economy

New Zealand consumer spending decreased in the three months through June, indicating that the country's economy experienced a downturn during this period.

Debit and credit card spending per person slipped to NZ$5,045 ($3,014) in the second quarter, marking the lowest level since the first three months of 2022, Statistics New Zealand data showed Friday in Wellington. The average number of transactions per person was 94, comparable to the lowest level in the past three years.

The Reserve Bank and most economists predict that the gross domestic product will decline in the second quarter as rising unemployment and flat house prices prompted consumers to hunker down. The GDP report due Sept. 18 is also expected to reveal weakness in construction and manufacturing output as many firms curbed investment amid uncertainty over the impact of US tariff policy.

Although the Reserve Bank of New Zealand has lowered interest rates by 250 basis points since last August, people are still reluctant to spend, especially on non-essential items such as travel and dining out. While home-loan rates are falling, many borrowers on fixed-terms are yet to get the full benefit yet and as a result are watching their budgets closely.

RBNZ Governor Christian Hawkesby said this week that policymakers had been surprised by the “confidence shock” in the second quarter.

He said the bank expects a pickup in growth in the second half and reiterated an intention to cut the Official Cash Rate to 2.5% by the end of the year from 3%, assuming the data was consistent with the central bank’s expectations.

The leading indicators for the third quarter show signs of a slight economic recovery. Retail card spending rose for the third straight month in August, Statistics New Zealand said today. Still, the performance of a manufacturing index dipped to 49.9 in August, indicating a slight contraction, Bank of New Zealand said.