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New Zealanders are reducing spending at a faster rate than during the global financial crisis (GFC) and are close to surpassing spending during the 1980s stock market crash and the hard times of the 1970s.
Data released by Worldline on Wednesday showed June was a “particularly quiet” month for retailers.
Despite population growth, spending fell 2.3 per cent compared with the same period last year.
“June is typically the slowest month of the year for sales, but the first two weeks of June this year were also significantly slower than last year. This resulted in light transactions,” said Bruce Proffit, chief sales officer.
“However, activity at least picked up in the last few days of June compared to June last year, although activity levels remained low overall.”
Infometrics chief forecaster Gareth Kiernan said Statistics New Zealand’s retail trade survey showed seasonally adjusted per capita quarterly sales had fallen 12.6% since the peak in June 2021.
That exceeds the 10.3% peak-to-trough drop during the global financial crisis.
On a cumulative annual basis, spending is down 8.5% from its recent peak.
Mr Kiernan said if quarterly sales figures remained at current levels for the rest of the year – which seems optimistic at this stage – the decline from the peak would be 9.9 per cent.
By comparison, annual per capita sales fell 10% between March 1977 and September 1978, and by another 10.1% between June 1987 and December 1991.
That compares with an 8.5 per cent drop during the global financial crisis.
“In short, in terms of the contraction in per capita spending, this recession has already surpassed the global financial crisis and is on track to surpass the stock market crash/economic reform/global recession of the late 1980s and the economic downturn of the mid-to-late 1970s,” Kiernan said.
It has a Huge impact on retailers – Centrix data showed that retail business clearance rates increased 44% year-on-year, the largest increase of all business categories tracked by the credit company.
Chris Wilkinson of First Retail Group said retailers across the country were feeling the effects of restricted spending and a drop in shoppers.
“Job security, high living costs and falling asset values are all weighing on people’s minds, causing spending to shift from wants to needs.”
He said retailers are hopeful that as interest rates rise and the country technically emerges from recession, things will stabilize.
New Zealand Retail Association chief executive Carolyn Young said the situation was “extremely difficult” for retailers.
She pointed to Westpac data showing consumer confidence levels had fallen to levels last seen during the 1987 financial crisis. “If you look at that period of time, we’ve been down for a long time and we’re still hovering there.”
she says Wellington has been particularly hard hit Government layoffs and the knock-on effects on other businesses.
Even heard Layoffs “It’s enough to undermine confidence and make people think twice about what they do,” she said.
She said that while lower interest rates late this year and next could bring some relief, the process would be slow because households would only feel the impact when they restructured their mortgages.
To help businesses hold on, it would be useful to know what measures the government plans to take, Yang said.
Measures such as changing sick leave rules or simplifying holiday laws would help ease pressure on businesses.
“While the government doesn’t have the money, they can use other means to cut through red tape.”
Source: RNZ
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