PwC’s Retail and Consumer Insights provides the latest consumer behaviour news and trends in New Zealand and internationally. We analyse data from the PwC Retail and Consumer Dashboard (focusing on electronic spending by industry in New Zealand) to equip you with insights to inform your business decision making. Our commentary also covers our observations of key changes in the ANZ-Roy Morgan Consumer Confidence Index, Heart of the City footfall data and other local and global sources.
Key highlights from our May 2021 edition include:
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Looking at the ANZ-Roy Morgan Consumer Confidence Index, it’s interesting to see that the Index rose 4 points to 115 in April. However, this still remains short of its historical average of 120. Another important thing to note is that a net 18% of respondents think it is a good time to buy a major household item, which is up 4 points. From a retail perspective, this remains the single best indicator of consumer sentiment in the survey.
Despite the Government’s recently announced removal of tax-deductibility of interest on loans and an extension of the brightline test, house price inflation expectations in April were little changed at 6% p.a - a historically very high level. While house price inflation expectations appear to have peaked, there does not appear to be any meaningful market retreat as a result of the Government’s recent initiatives. Barfoot & Thompson reported the lowest level of property listings for five years at the end of April and new listings fell 21.7% on those for March, suggesting there was no major influx of new listings from investors abandoning the market2.
"While April's residential property data trading was down from the levels recorded in March, it is important to recognise that there is always a seasonal downturn in April and the decline experienced this year does not appear to be significantly different from that seen in previous years."
John Schellekens - PwC Partner
Despite exceptionally strong household inflation expectations, consumers appear to remain cautious about making significant household purchase commitments, reflecting ongoing uncertainty about the economic outlook. Despite these reservations, retail sales reported by Stats NZ have remained buoyant, as the substitution of international holidays, the ‘feel good impact’ of house price inflation, low interest rates and historic levels of Government stimulus continues to support local retailers.
1 With special thanks to PwC’s Matt Gunn and Rebecca Matthews for their assistance in preparing this edition.
2 Stuff: https://www.nzherald.co.nz/business/barely-affected-vs-signs-of-change-what-to-take-from-latest-barfoot-thompson-house-sales-figures/
The disparity in consumer spending habits can be seen in the Stats NZ electronic card transactions series data that includes all debit, credit, and charge card transactions with New Zealand-based merchants. Using the Retail and Consumer Dashboard developed by PwC New Zealand, it is readily apparent that while consumer spending on durables3 recovered rapidly to pre-COVID-19 levels, supply chain constraints and a natural limit on substitution related durables purchases (how many jet skis or sofas do consumers really need?) have caused spending in this category to plateau.
Durables - Change in spending last 12 months
Hospitality - Change in spending last 12 months
Unfortunately, year-on-year figures for the month of April (released by Stats NZ on 11 May 2021) are distorted by record low levels of spending in April 2020 (due to New Zealand being in alert level 4 and 3 for the whole month), resulting in large increases in many sub-industries between April 2020 and April 2021, e.g. the hospitality industry was up $1.1 billion (1,942 %) from $57 million in April 2020 to $1.2 billion in April 2021. However, to put these figures in context, it is interesting to note that hospitality spending in April 2021 was up 7.0% on April 2019 ($1.1bn).
In terms of the much anticipated Australasian bubble, the benefits remain to be seen as anecdotal evidence suggests that during the first few weeks of the quarantine free trans-Tasman travel most arrivals appear to be visiting family and friends rather than boosting local businesses and tourism operators4.
3 Furniture, electrical, and hardware, recreational goods, department stores, pharmaceutical, cosmetic, toiletry goods and other store-based retailing.
4 Stuff: https://www.stuff.co.nz/travel/news/124929034/transtasman-bubble-aussie-travellers-visiting-loved-ones-rather-than-attractions
Our Retail and Consumer Dashboard also tracks pedestrian footfall data on an hourly basis across the Auckland CBD5. While the post lockdown recovery is immediately apparent, the longer term decline in pedestrian footfall across the Auckland CBD over (at least) the last three years is also worth noting.
Monthly Pedestrian Count (% change YoY)
Average Pedestrian Count (per hour)
Ongoing roadworks and disruption caused by construction activity, including the Central Rail Link, has contributed to this decline in pedestrian footfall and is clearly a cause for concern for inner-city retailers. Separately, Auckland Council’s Queen Street pedestrian trial has resulted in disgruntled businesses and property owners filing an unprecedented High Court action. The judicial review application claims that New Zealand’s once premier high street “has been reduced to two lanes by plastic sticks and bollards”. Recent proposals by the Wellington City Council to increase car parking charges in central Wellington will also be a concern to retailers who have already suffered as some workers appear reluctant to return to their offices.
5 Source: Heart of the City: https://www.hotcity.co.nz/city-centre/results-and-statistics/pedestrian-counts
One year after the COVID-19 pandemic partially shut down many of the world’s economies, PwC recently released its 2021 Global Consumer Insights Pulse Survey6. In terms of the impact of COVID-19 on the retail sector, the survey found:
Perhaps more interestingly, going forward, the survey identified the following key international growth drivers for retailers:
6 8,738 participants in 22 territories
Recent deals - recent announced transactions in the retail and consumer sector include:
7 Advised by PwC New Zealand
We update our dashboard monthly with the latest data on electronic spending, consumer sentiment and Auckland pedestrian analysis. Through our dashboard we identify and analyse trends over time, particularly in the aftermath of the COVID-19 lockdowns. If you are interested in online access to our dashboard to help inform your decision making, please contact: Rebecca Matthews
PwC has advised many of New Zealand’s largest listed and privately owned retailers across a wide variety of projects and roles, including assurance, tax, capital solutions, transactions services, M&A, restructuring, real estate, supply chain and digital consulting services.
We have a comprehensive understanding of the rapidly evolving retail environment (offline and online) and are uniquely placed to combine strategy with technical, industry and execution expertise. We pride ourselves on a focused partnership approach to our work in the sector, based on principles of trust, independence and challenging insight, using specialist teams tailored to specific client needs.