Major implications for retail sector as spending takes a dive

Spending over the week was up on last year amongst supermarkets and pharmacies. Photo Pixabay

Spending through Paymark, which processes the majority of all electronic transactions in the New Zealand, dropped a huge 72 per cent below year-ago levels on Thursday March 26, not surprisingly, being the first day of the Level 4 restrictions.

Retail spending then remained down by similar levels for rest of the week ending Sunday.

In contrast spending on Monday and Tuesday had been around 50% above the same time a year ago.

The stock-up was especially noticeable amongst Liquor outlets, Hardware and Homeware shops and Recreational goods stores, hinting at activities planned for the coming days and weeks.

Come Thursday, merchants broadly fit into four groups for the rest of the week.

There were a few merchants with payments still exceeding year-ago levels, such as electricity companies and consumer finance suppliers.

There was a slightly larger group with still significant volumes of spending but now at levels below last year.

This group includes supermarkets, fruit and vege shops, pharmacies, gas suppliers, telecommunication services, security firms, churches and charities.

But by far the largest group comprised those merchants who are barely transacting any payments now.

There is a fourth group that fared even worse. There were the likes of travel companies, entertainment firms and parking services whose payments were negative in the first four days of Level 4 restrictions – that is, they were having to pay money back to their customers.

Taking the ups and downs of the whole week, non-fuel spending through Paymark totalled $907 million. This was 33 per cent below the previous week and, on an underlying basis, 27 per cent below levels of a year ago.

Spending over the week was up on last year amongst supermarkets and pharmacies but down sharply in total for accommodation providers and cafes, bars and restaurants.

The pre-lock-down spending splurge was not enough to offset the loss of sales later in the week for most merchants. Across the non-food retailers, excluding pharmacies, spending was 28 per cent below year-ago levels for the week.

In total, the spending decline for the week was largest in Otago (-39.8 per cent), followed by the two major centres Auckland/Northland (-32.4 per cent) and Wellington (-29.6 per cent).