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Income squeeze puts spending focus on household staples - Kiwibank

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Senior economist Mary Jo Vergara says data showed households are mostly spending on staples like petrol and food. Photo: RNZ / Dan Cook

Households are reluctant to spend on big ticket items although overall consumer spending is higher, according to Kiwibank.

The bank's data for the three months ended June showed card spending rebounded 4 percent over the last quarter and increased almost 5 percent compared to a year ago.

However, Kiwibank economists said while total spending was up, there were shifting preferences.

Senior economist Mary Jo Vergara said low levels of unemployment continued to support household spending, but disposable incomes were being squeezed.

"Although aggregate spending is holding up, when we look at the categories, we're seeing they're actually pulling back on those discretionary, non-essential goods," Jo Vergara said.

"We are now in an environment where it's much more expensive with higher interest rates and higher consumer prices, so in that environment we're seeing that households are spending on those staples like petrol and food items.

"We are seeing in terms of volume when you try to strip away the effects of higher prices it is a bit more subdued than the nominal value would suggest."

Vergara said spending slumped 6 percent annually on discretionary items, such as home furnishings and contents.

"Household contents and furnishings had such a steep run-up over the pandemic with people spending their lockdown savings."

Entertainment spending fell 4.4 percent over the quarter, while the total spend on flight bookings declined 4.5 percent over the same period.