(Bloomberg) -- New Zealand consumer spending remained weak in the third quarter, adding to signs the economy may have been in recession.
Retail purchases on credit and debit cards fell 0.7% from the second quarter, when they declined 2.8%, Statistics New Zealand said Monday in Wellington.
New Zealand’s economy shrank in the second quarter and subdued spending adds to risks that the contraction extended into the third even as modest income tax cuts took effect at the end of July. The Reserve Bank responded to a sharp decline in domestic demand by starting to ease monetary policy in August, and followed up with a larger, 50 basis-point cut last week.
“Retail spending volumes are likely to have contracted further in the third quarter as the consumer-led downturn continues,” said Mark Smith, senior economist at ASB Bank in Auckland. “Given the weak economic backdrop, we don’t envisage a strong recovery in card spending or robust Christmas trading for retailers.”
While spending on groceries and other consumables was little changed, purchases of durable goods, clothing and fuel declined, today’s data show. Hospitality sector spending also slowed.
ASB expects the RBNZ to cut the Official Cash rate by a further 50 basis points at its final decision of the year on Nov. 27, with more reductions forecast for next year.
“That will set the scene for a brighter 2025 for the retail sector,” said Smith.
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