Spending bounced before and after lockdown

Wednesday, 27 May 2020

Retail spending bounced back after the lockdown but shops still face a challenging road ahead. (Video first published on May 27)

New Zealanders spent up large at supermarkets, butchers and on alcohol ahead of the March 26 alert level 4 lock down.

In the lull caused by the lockdown, spending stayed high at supermarkets, 40 per cent above normal, while dropping in nearly every other category.

'Normal' was calculates as the spending levels recorded on March 19.

Kiwis moved their retail therapy online, with increases in spending on digital entertainment and online shopping, particularly once the country moved to level 3.

Retailers have experienced a bounce in spending since the end of the lockdown.

* Retail spending falls by 50 per cent during lockdown

* Consumers must ditch disposable consumption mentality to buy NZ Made

* Grocery spending online up 42 per cent ahead of the alert level four lockdown

Grocery spending spiked as people got ready for lockdown.

At level 2, spending bounced again, particularly in fast food, cafes and beauty services.

Jarrod Kerr, chief economist at Kiwibank, said the figures, while obvious, told a story about how New Zealanders responded with their wallets during the Covid-19 crisis.

'This data shows we were forced to basically spend on groceries and a few online items during lockdown. As a percentage of our total spending, spending on groceries went from 20 per cent to about 40 per cent,' Kerr said.

The rise in consents will dent the housing shortage but it will take time, Kerr says.

'But what was most important about this data is how we returned to normal in level 2.'

Spending since the move to level 2 showed strong bounce backs in many categories, Kerr said.

Petrol and diesel spending, for example, spiked right back to pre-lockdown levels.

Kerr said he was surprised by how quickly people got back into their cars.

'The one interesting category for us, I think, is the structural shift in online spending. I think we were trending towards buying more online but the lockdown has accelerated that trend to online.'

The lockdown gave shoppers the opportunity to become more familiar with online shopping.

'They probably found that its easier and more convenient and there is a lot more available online,' he said.

Retail NZ chief executive Greg Harford says there is still a long road ahead for retailers.

'We know we are moving to a more digital world and the lockdown just accelerated the move.'

Credit card spending remained low, both in terms of volume and value, according to the Kiwibank data.

'Job security is still front of mind for many New Zealanders,' Kerr said.

'There’s an understandable reluctance to go out and spend given such uncertainty. Moreover, there’s still a clear sense of caution in the air. New Zealand has done incredibly well in managing the spread of Covid-19, but we’re all fearing a second wave and if history’s any guide, it’s possible.

Retail NZ chief executive Greg Harford said a number of retailers were finding level 2 difficult.

'Struggling is an understatement,' Harford said.

'It is certainly true that spending has increased since we moved into level 2. But my sense is that spending is still down across the board compared to last year.'

The impact of increased spending was spread differently across the country, he said.

'Even if sales are up from where they were, retailers rely on such tight margins that its not sufficient to recover from the lockdown,' he said.

Businesses needed customers to get out and spend but that would require people to feel confident to spend.

'We think it would be good if the Government put some real economic stimulus into the market, either through helicopter payments or tax cuts,' Harford said.

'What has kept people employed has been the wage subsidy and the wage subsidy runs out for many retailers over the next four weeks. That's when business owners will be making really hard decisions.'

It will be a long hard slog to recover, Harford said.