Retail spending falls in September as consumers face hiked fuel prices, rising interest rates

Paymark figures show consumer spending fell again in September as consumers dealt with a triple-whammy of higher petrol prices, rising interest rates and bad weather.

Consumer spending processed through all core retail merchants in Paymark’s payments network in September reached $3.572 billion, down 1.3% on the same month last year.

It follows a weak month in August, when spending was down 1.8% compared with 2025.

“New Zealand is off to a slower start to the usual end-of-year surge as we approach the pre-Christmas shopping season,” Paymark’s chief sales officer Bruce Proffit said.

Consumers faced at least three knocks over September that may have contributed to the slower spending, he said.

“Petrol prices jumped sharply in mid-September. Spending through Paymark at fuel outlets was running 35% ahead of year ago levels in the week ending 30 September, largely due to higher prices but also due to more transactions.”

He said interest rates had also risen over the last three months as the Official Cash Rate (OCR) rose 50 basis points (bps) from 2.25% to 2.75%.

“And thirdly, in the last weekend of the month, the weather turned cold, wet and windy across much of the country, which tends to keep shoppers at home.”

Proffit said the net effect on consumers can be clearly seen by comparing the year-on-year spending at non-food retailers in the first week of July with the last week of September.

“In the first seven days of July, non-food spending went from being +0.9% above year ago levels to being -7.1% below year ago levels in the final seven days of September,” he said.

Regionally, annual growth rates for core retail spending in September were highest in Gisborne (+3.1%) and Hawke’s Bay (+2.8%).

Meanwhile, spending dropped annually in Marlborough by 9.7% and by 3.3% on the West Coast.

In Auckland, spending at core retail merchants in September fell 1.7% compared with the previous year, following a 2.2% drop in August.

Earlier this week, the ANZ-Roy Morgan New Zealand Consumer Confidence index dropped 0.4 points to 97.6 in September.

However, the index remains 17 points above its April low.

ANZ economists said the New Zealand economy is a mixed bag at present.

“Key goods exports are benefiting from robust prices and the low NZ dollar, which is also supporting the tourism sector just as seasonal demand is set to pick up.

“Meanwhile, the housing market is gradually losing steam, monetary stimulus is being withdrawn, the unemployment rate remains elevated, cost-of-living pressures continue to bite, and consumers are feeling cautious.”

They said renewed pressure on fuel prices was adding to that caution.

“We think the conditions are in place for the recovery to continue. However, for many households it is unlikely to feel like much of a recovery.”