Consumer spending remains sluggish despite falling interest rates

Consumer spending remained weak in March despite recent interest rate cuts, according to new data from Worldline NZ.

The figures show little change from February’s subdued spending patterns, reflecting a cautious retail environment.

Consumer spending through all core retail merchants in Worldline NZ’s payments network totalled $3.95 billion for March 2025, down -0.8 percent compared to the same month last year after accounting for merchant changes.

Worldline NZ’s Chief Sales Officer, Bruce Proffit, notes that spending habits have shifted, with consumers prioritising essentials like groceries over discretionary items such as hardware, furniture, and dining out.

“The core retail merchants, excluding Hospitality, experienced slight spending growth during the month, albeit the growth rate was low and the experience of merchants was mixed,” says Proffit.

“It seems the lower interest rates that were recently announced are yet to show in big-ticket spending especially.”

According to a Reuters report, the ANZ-Roy Morgan consumer confidence index fell to 93.2 in March, down from 96.6 in February, reflecting increased pessimism among consumers. ANZ Chief Economist Sharon Zollner noted: “The economy is improving under the hood, but we’re at the very early stage where it doesn’t feel like it.”

She highlighted that rising unemployment and business failures continue to impact consumer sentiment.

Total spending through core retail merchants (excluding hospitality) reached $2.96 billion in March, reflecting a modest increase of +0.4 percent compared to March 2024. Within this group, spending at food and liquor merchants, including supermarkets, rose by +0.8 percent, while hardware and furniture stores saw a notable decline of -6.2 percent.

Hospitality spending through Worldline NZ’s network dropped significantly, totalling $0.99 billion in March – down -3.2 percent from last year. Proffit highlighted that the timing of Easter this year played a role in the figures, as the holiday falls entirely in April in 2025, whereas last year it was split across March and April.

“Last year Easter fell partly in March and partly in April, whereas this year it is all within April, so not surprisingly, this had the greatest impact on Hospitality sector spending,” says Proffit.

The data also revealed notable regional variations in spending. Whanganui recorded the highest annual core retail spending growth at +2.9 percent. In contrast, spending in major centers continued to lag, with Auckland/Northland (-1.1 percent), Wellington (-2.3 percent), and Canterbury (-1.5 percent) all reporting declines.

Despite the Reserve Bank’s recent efforts to stimulate economic activity through interest rate cuts, consumer spending has yet to respond significantly. Retailers will be watching closely to see if lower borrowing costs translate into higher spending in the coming months.

The BusinessNZ Planning Forecast for March 2025 notes that while there are elements of improvement in retail spending and a downward trend in interest rates, significant uncertainty persists, impacting household expenditure.

The trends underscore the importance of strategic planning and adaptability for SMEs operating in the retail space. A recent survey by Buy NZ Made revealed that 59 percent of small businesses are grappling with rising costs, and 42 percent are concerned about cashflow.