New data suggests post-lockdown rebound weaker than last year

It is early days, but the first economic data to capture the shift out of a nationwide lockdown shows a weaker consumer spending rebound than many expected – or hoped for.

Retail card spending edged up 0.9 per cent in September compared with August, as Covid-19 alert levels eased from level 3 to level 2, except in Auckland, Stats NZ said.

“Card sales remained low in September, as Auckland was in Covid-19 alert level 4, before dropping to alert level 3 towards the end of the month,” business performance manager Ricky Ho said.

Seasonally adjusted retail spending was up $45 million (0.9 per cent), and total spending was up $104 million (1.6 per cent) in September 2021, compared with August 2021.

“That was much weaker than expected, with spending in all categories (excluding groceries) remaining well below pre-Delta levels,” said Westpac senior economist Satish Ranchhod.

“It appears that activity restrictions are still having a significant dampening impact on spending.”

ASB economist senior economist Mark Smith described the numbers as “more tepid than expected”.

The continued high level of restrictions in Auckland and timing of the relaxation of restrictions elsewhere were possible catalysts, he said.

“However, there are also tentative signs that there may be less impetus in the consumption recovery from lockdown this time around.”

The large third quarter fall in card spending pointed to a sizeable dip for retail trade, and wider GDP for the quarter, Smith said.

“With the delta variant proving difficult to shake off in Auckland and starting to spread into nearby regions, the post lockdown rebound in retail activity is likely to be shallower than it would otherwise be.”

Looking across retail categories, there was some lift in spending on household durables, Westpac’s Ranchhod noted.

But, spending in all categories (excluding groceries) remained around 25 per cent below pre-Delta levels, he said.

Weekly spending gauges for October indicated that spending appetites were starting to lift from their earlier lows.

“We expect that this trend will continue,” he said. “Even so, we are still likely to see big differences across sectors, with the hospitality sector lagging other parts of the economy.”

At the same time, disruptions to global shipping and manufacturing were continuing, and supply side disruptions were likely to become more pronounced, Ranchhod said.

“Manufacturers globally are reporting ongoing difficulties sourcing chips and other components. On top of that, shipping companies are expected to divert capacity towards markets in the Asia and Northern Hemisphere ahead of the Black Friday, Christmas and Lunar New Year shopping periods.”

For New Zealand, that combination would signal ongoing difficulties sourcing some goods ahead of the holiday shopping season, along with continued upwards pressure on prices, he said.

Meanwhile the ANZ Truckometer for September, also released today, showed a mixed reading on the post-lockdown bounceback in traffic volumes.

The Light Traffic Index lifted 6.4 per cent in September, while the Heavy Traffic rebounded 13.4 per cent (month on month).

“Both light and heavy traffic lifted in September as restrictions eased overall, but remain well short of pre-Covid levels”, said ANZ Chief Economist Sharon Zollner.

Differing regional lockdown restrictions would mean that the Truckometer indexes were unlikely to be a reliable GDP indicator in the near term, she said.

“Neither light nor heavy traffic fell nearly as much as in lockdown last year in terms of either monthly changes or activity lows, but given the restrictions in Auckland are set to be much longer lasting, this does not necessarily imply a smaller hit to GDP overall.”

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