The third quarter of 2022 saw the biggest year-on-year gains for the hospitality sector, up 38 percent on 2021. Photo: 123RF
Retail spending continues to charge higher in the latest figures, but a senior economist warns consumers are fast approaching a tipping point.
Retail card spending rose 1 percent in October according to data from Westpac, with the bank forecasting a 0.6 percent rise in spending levels in November data.
Westpac senior economist Satish Ranchhod said international visitors boosted demand in the sector, countering anecdotal reports of doom and gloom.
Another factor contributing to the rise in spending was price rises across the board for goods and services.
"Households are still out there, they're still spending up and that's been quite a boon for businesses across the country," said Ranchhod.
"I think we are still seeing some genuine strength out there."
The hospitality sector echoed that, with an increase in sales activity reported in its latest data.
The Restaurant Association's hospitality report released this week showed a 7.7 percent sales increase for the year ended September over the previous year.
The third quarter of 2022 saw the biggest year-on-year gains, with revenue up 38 percent on the same period a year ago.
Food delivery continued to thrive as New Zealanders spent more and more on takeaways. The food-to-go and takeaways sector recorded sales of $517 million more than last year.
Growth tipped to slow 'quite sharply'
Despite the positive economic trends, bank economists have predicted the tide may be turning.
Westpac said the spending power of consumers will be squeezed further as more people roll onto paying higher fixed rates on their mortgages.
"As we look to the new year I do think a lot of that strength is going to fade," Ranchhod said.
"Interest rates have been pushing higher, and that's going to pass through to increases in debt servicing costs for a lot of households.
"We're expecting to see growth slowing quite sharply in the new year."
While households had been insulated in part because many were still paying lower fixed rates on their mortgages, over the coming year that won't be the case.
"The increases in borrowing costs that we are seeing will be a big dampener on domestic spending and that'll be tough for a lot of households and retailers over the coming year."
International visitors would help to offset some of the drag on the retail sector caused by increased debt servicing, Ranchhod said.
