(Photo: Getty Images)
(Photo: Getty Images)

BusinessJuly 9, 2020

The data behind New Zealand’s post-lockdown sugar rush

(Photo: Getty Images)
(Photo: Getty Images)

Despite dark clouds on the horizon, New Zealand’s post-lockdown spending spree is still going strong. Mary Jo Vergara from Kiwi Economics shares insights into what’s driving it – and how long it will last.

Covid-19 and the level four lockdown has bought about some dramatic shifts in New Zealanders’ spending and consumption habits, and many of these trends are continuing. At Kiwi Economics, we’ve been playing around with the credit and debit card data for different sectors to get a sense of how things have changed and where they might be heading. Here’s what we found.

Grocery and Hospitality

In the lead-up to lockdown, we saw transactions at grocery stores spike. Lines snaked outside supermarkets as New Zealanders scrambled to fill their freezers, cabinets and bathrooms with (too much) toilet paper. We can see this clearly in grocery store data, which shows spending lift from 20% to 40% in late April.

For cafes, however, spending flat-lined at near-zero before plummeting during lockdown as New Zealanders were forced to put on the apron and bring out the pans.

After 50 days spent under levels four and three, transactional data spiked once again, particularly in the hospitality space. While partly driven by the push to buy local, the data shows a clear release of some pent-up demand and spending of lockdown savings which is still going strong.

Online shopping and entertainment

The data shows that during level four lockdown, New Zealanders were funnelled online for their entertainment and they’ve stayed there ever since. Social distancing also forced us away from physical stores to online stores in search of bargains. As we enter an ever more digital world, we expect the shift to online retail shopping to accelerate, and that can be seen in the upward trend of the below graph.

Does the structural shift to online spell the death of high-street retail? Probably not. Quirky K-road boutiques? Maybe so. Remaining physical retail outlets will need to trade on a point of difference such as consumer experience or where it’s convenient for consumers to try before they buy. For retail more broadly, it would be wise to have a slick online presence.

DIY and home renovation

It’s clear that toilet paper wasn’t the only thing people were panic buying before the lockdown. Hardware spending spiked dramatically in late March before plummeting during the lockdown. Since level two, however, this spending has resumed. The closed borders and lack of travel options have encouraged more New Zealanders to take up the tools, order pools, fix fences and even buy pets.

While we also see this increased spending on other household items, looking ahead we expect fewer visits to our hardware and furniture stores. Stats NZ has already warned of weaker demand for non-durable goods such as cars, couches and cutlery. Job security is still front of mind for many New Zealanders and there will be a growing reluctance to go out and spend large as time goes on. The inevitable rise in unemployment may also dampen future spending and investment.

Domestic travel

While our borders remain closed and their future remains uncertain, we’ve seen a surprising surge in accommodation and recreational travel among New Zealanders exploring their own country. A flight to Dubai is being swapped for a flight to Dunedin, a cruise to Queensland is being swapped for drive to Queenstown, and a trek along the Himalayas traded in for the Tongariro Crossing.

While the rise in domestic spending is encouraging, it won’t come close to filling the massive void left by foreign tourists. So much damage has already been done, and while we sit pretty in our relatively pristine bubble, Covid-19 continues to wreak havoc worldwide. So the billion-dollar question is: how long will the sugar rush continue?

Mary Jo Vergara is an economist with Kiwibank’s Kiwi Economics team.

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