NEW ZEALAND RETAIL SALES ANALYSIS
Retailwatch Report - August 2025
Report Date: October 2025
Data Period: August 2025 & Q2 2025
Note: September 2025 Retailwatch data not yet publicly released
EXECUTIVE SUMMARY
New Zealand's retail sector showed encouraging signs of recovery in August 2025, with retail card spending rising 0.7% - the strongest monthly result for 2025. This marks the third consecutive monthly increase, suggesting lower interest rates and easing inflation are beginning to support household spending and economic recovery.
Key Findings:
- August 2025 retail card spending: +0.7% monthly (best 2025 performance)
- Three-month trend to August: +0.8% (first positive quarter-on-quarter since February)
- Annual growth: +0.9% year-on-year
- Q2 2025 retail sales volume: +0.5% quarterly, +2.3% annually
- Q1 2025 GDP growth: +0.8% quarterly (exceeding forecasts)
RETAIL CARD SPENDING - AUGUST 2025
Monthly Performance (Statistics New Zealand)
Electronic card transaction data recorded August 2025 retail spending up 0.7%, exceeding market expectations and representing the largest monthly increase for 2025.
Key Metrics:
- Total retail industries spending: +0.7% monthly
- Core retail industries spending: +0.9% monthly
- Three-month rolling average (June-August): +0.8%
- Annual comparison: +0.9% year-on-year
Category Performance:
Strong Growth:
- Hospitality: +1.4% monthly (strongest result since October 2024)
- Apparel: +1.8% monthly (recovering from July decline)
- Durables: Partial recovery following July weakness
- Electrical and electronic goods: Solid performance
- Supermarket and grocery stores: Continued steady growth
Declining:
- Fuel and service stations: Eighth consecutive monthly decrease
- Reflects lower fuel prices and reduced consumption
Significance:
The three consecutive months of positive growth (June, July, August) mark a notable shift from the weakness that characterized most of 2024 and early 2025. The three-month period to August showed 0.8% growth compared to the preceding three months - the first positive quarter-on-quarter comparison since February 2025.
QUARTERLY RETAIL TRADE - Q2 2025
Statistics New Zealand Retail Trade Survey (June Quarter 2025)
Total retail sales volume increased 0.5% in Q2 2025 compared to Q1 2025, significantly exceeding economist forecasts of a -0.3% decline.
Quarterly Performance:
- Volume growth: +0.5% quarter-on-quarter
- Value growth: +1.5% quarter-on-quarter (NZ$464 million increase)
- Total retail sales value (seasonally adjusted): NZ$31 billion
- Total retail sales volume (seasonally adjusted): NZ$25 billion
Annual Performance:
- Volume growth: +2.3% year-on-year (up from +0.7% in Q1 2025)
- Year-on-year improvement reflects easier comparisons and genuine recovery
Leading Categories (Q2 2025):
- Electrical and electronic goods
- Supermarket and grocery stores
- Specialized food retailing
- Clothing, footwear and accessories
ECONOMIC CONTEXT - RBNZ DATA
GDP Performance
Q1 2025 (March Quarter):
- GDP growth: +0.8% quarterly
- Significantly exceeded Reserve Bank forecast of +0.4%
- Exceeded consensus economist expectations of +0.7%
- GDP per capita: +0.5% quarterly
- Activity increased across all three high-level industry groups:
- Primary industries
- Goods-producing industries
- Services industries
Industry Performance Q1 2025:
- Manufacturing: Strong rise led by machinery and equipment production
- Business services: Significant increase
- Largest decreases: Arts and recreation services; information, media and telecommunications
2024 Context:
- Real GDP contracted -0.5% for full year 2024
- Recession in Q2 and Q3 2024 with contractions of -1.1% and -1.0%
- Recovery began Q4 2024 with +0.5% growth
RESERVE BANK OF NEW ZEALAND MONETARY POLICY
Official Cash Rate (OCR):
- Current OCR: 3.25% (held unchanged at July 2025 meeting)
- Previous cuts: Four rate cuts totaling 175 basis points since August 2024
- August 2024 to February 2025: OCR reduced from 5.5% to 3.75%
- February 2025: 50 basis point cut to 3.75%
- OCR maintained at 3.25% through mid-2025
Monetary Policy Assessment (August 2025 MPS):
Inflation:
- March 2025 quarter CPI: +2.5% annually (within 1-3% target band)
- Expected to approach top of target band in Q2 and Q3 2025
- Near-term increase driven by food prices and administered price rises
- Expected to return to ~2% target midpoint by early 2026
- Spare productive capacity in economy supporting inflation decline
Economic Activity:
- GDP growth over December 2024 and March 2025 stronger than expected
- Pick-up in household consumption and business investment
- Higher frequency indicators (April-May) suggest weaker growth
- July 2025 indicators suggest some improvement
- Significant spare capacity remains in New Zealand economy
Interest Rate Transmission:
- Mortgage and deposit rates continuing to decline
- Average interest rate on mortgage stock declining as households refix
- Close to half the mortgage stock due to reprice in September and December 2025 quarters
- Many households shifted to short-term fixed rates (1-2 years) anticipating further cuts
Labor Market:
- Unemployment continuing to increase
- Slack evident in labor market
- Lower capacity utilization across industries
SECTORAL TRENDS & CHALLENGES
Industry Performance Disparities:
Stronger Sectors:
- Agriculture: Higher dairy and beef prices boosting farm incomes
- Export-oriented industries: Benefiting from improved terms of trade
Struggling Sectors:
- Retail: Facing subdued domestic demand
- Construction: Weak activity levels
- Industries serving domestic market under pressure
Retail Sector Challenges:
Cost Pressures:
- Large increases in operating expenses (insurance, utilities, freight)
- Margin compression from intensive promotional activity
- Necessary discounting to maintain market share
Consumer Behavior:
- Consumer confidence at historically low levels
- Average transaction sizes declining
- Cautious spending due to cost-of-living pressures
- Four consecutive years of falling real house prices
- Real disposable income per capita declined two consecutive years
Structural Changes:
- Multiple retailers preparing staff layoffs
- Store closure programs underway
- One major retailer closing 16 stores
- Another retailer exiting entire brand
- Industry assessment: "Getting through the next six months is really critical"
Comparative Performance:
- Australian retail conditions improving faster than New Zealand
- NZ retail recovery lagging Australian pace
- Retail NZ reports majority of retailers "far from optimistic"
GLOBAL ECONOMIC FACTORS
Tariff Impact (August 2025 RBNZ Assessment):
US Tariffs:
- US increased tariffs on NZ goods from 10% to 15%
- Broader US tariff increases on imports from most countries
- Potential negative impact on NZ exporters, particularly those US-reliant
Global Trade:
- Higher tariffs reducing global trade volumes
- Changes to global trading patterns emerging
- Limited evidence of major supply chain disruption to date
- No material impact yet on NZ import/export prices
Uncertainty Effects:
- High uncertainty causing businesses to delay investment and hiring
- Both domestic and international businesses affected
- Global growth expected to slow in second half 2025
- Trade protectionism presenting downside risks to global economy
RETAILWATCH METHODOLOGY
About Retailwatch (Datamine):
Retailwatch is New Zealand's most reliable monthly retail spend analysis, produced through a joint initiative between Datamine and banking and financial partners.
Data Sources:
- Anonymized and aggregated retail spend data from banking partners
- Represents approximately 77% of credit and electronic card transactions in New Zealand
- National and regional weightings applied via proprietary algorithms
Methodology:
- Retailer categories from Merchant Category Codes (MasterCard/VISA)
- GST-exclusive figures
- Monthly periods of 28 days (Quarterly periods of 91 days)
- Standardized periods ensure consistent weekday/weekend comparisons
- Seasonally adjusted where applicable
Coverage:
- Electronic card transactions with NZ-based merchants
- Includes all debit, credit and charge card transactions
- In-store and online spending segmented
- Regional analysis available
- Category-specific breakdowns
Publication:
- Free monthly dashboard available via subscription
- More detailed analytics available through Retailwatch+ and custom solutions
OUTLOOK & IMPLICATIONS
Near-Term Economic Projections:
RBNZ Expectations:
- Economic recovery expected to broaden
- Lower interest rates supporting household spending and business investment
- Businesses expected to hire more people as demand increases
- Recovery pace uncertain due to:
- Global tariff impacts
- Labor market weakness
- Consumer caution
IMF Assessment (March 2025):
- Real GDP growth projected: +1.4% for 2025, +2.7% for 2026
- Recovery expected but modest
- Medium-term growth driven by migration
- Productivity growth expected to remain modest without structural reforms
Retail Sector Outlook:
Positive Factors:
- Interest rate reductions flowing through to consumers
- Over 70% of mortgages scheduled to reprice in 2025 at lower rates
- Inflation returning toward 2% target supporting real incomes
- Pent-up demand in some categories
- Online channel growth providing opportunities
Risk Factors:
- Consumer spending likely to remain "patchy"
- Labor market weakness weighing on confidence
- Four years of falling house prices impacting wealth effect
- Ongoing cost pressures on retailers
- Structural capacity reduction continuing
- Global uncertainty from tariffs and geopolitical factors
Strategic Priorities for Retailers:
- Omnichannel optimization essential
- Cost management critical priority
- Network and location assessment
- Balance between promotional activity and margin protection
- Enhanced customer experience across all channels
SUMMARY
New Zealand's retail sector demonstrated resilience in August 2025, achieving 0.7% monthly spending growth - the best result for 2025. Three consecutive months of positive growth and the first positive quarterly trend since February suggest the sector is stabilizing after a prolonged period of weakness.
The broader economic recovery remains fragile but evident, with Q1 2025 GDP growth of 0.8% exceeding expectations and Q2 2025 retail volumes rising 0.5%. The Reserve Bank's aggressive interest rate cuts (175 basis points since August 2024) are beginning to support household spending, though the full transmission effect is yet to be realized.
Significant challenges persist: retailers face margin compression from intensive promotional activity, consumers remain cautious amid cost-of-living pressures, and structural adjustment continues with store closures and staff reductions across major retailers. The labor market shows weakness, and global trade uncertainty from tariffs presents downside risks.
However, the combination of lower interest rates, stabilizing inflation approaching the 2% target, and improving GDP growth provides a foundation for gradual recovery. The pace and sustainability of this recovery will depend on labor market stabilization, continued monetary support, and retailers' ability to adapt to changing consumer behavior and channel preferences.
Data Sources:
- Retailwatch: Datamine monthly retail spend analysis (www.datamine.com/datafix/retailwatch)
- Statistics New Zealand: Retail Trade Survey, Electronic Card Transactions
- Reserve Bank of New Zealand: Monetary Policy Statements, GDP data, economic indicators
- Westpac Business Insight: Card spending analysis
Report prepared using data current as of October 7, 2025
Note: September 2025 Retailwatch data expected late October 2025. This report uses August 2025 as the most recent comprehensive retail spending data available.