An EFTPOS card being swiped at a terminal. Photo: 123RF
Electronic card spending fell 1.7 percent month-on-month in May, in contrast to expectations of a rise in retail spending.
New Stats NZ figures show reduced spending on fuel and clothing led the drop, followed by motor vehicle costs.
Core spending, excluding fuel and vehicle spending, fell 1.2 percent over the month; while total retail spending, including non-retail and services, fell 1.9 percent.
Westpac senior economist Satish Ranchhod, who expected to see a slight rise in spending, was surprised.
"Weakness in retail spending has been widespread," he said.
"There were sizeable falls in spending on household durables (like furnishings) and hospitality. That was despite a fall in fuel prices over the month.
"The softness in spending is particularly surprising given the lift in population growth in recent months as migration inflows have surged."
Ranchhod said household finances were coming under increasing pressure as retail prices continue their rapid ascent.
"We expect those factors will be an increasing drag on household spending over the months ahead.
"Today's result reinforces our expectations for a downturn in domestic economic conditions over the coming months."
ASB senior economist Kim Mundy said the high inflation environment suggested the cutback in spending over the month was even more pronounced than the figures, which were measured as values, suggested.
"We don't expect the current headwinds - a weak housing market, high living costs, high inflation and low consumer confidence will evaporate any time soon.
"As a result, consumer spending is likely to remain soggy over the second half of 2023."
However, she said there were some bright spots, with high levels of net migration expected to support consumption and the housing market, even if per capita levels continue to decline.