New Zealand Debit, Credit Card Spending Fell in June

By Tracy Withers

July 21 (Bloomberg) -- New Zealand consumer spending on debit, credit and store cards fell in June, adding to signs record-high interest rates and a slumping housing market may have pushed the economy into a recession.

The value of transactions on electronic cards at retailers declined 0.4 percent from May, Statistics New Zealand said in a statement released in Wellington today. Transactions excluding fuel and vehicle sales fell 1.2 percent.

Retail sales also posted the biggest fall in more than four years in May, a report last week showed, as households outlaid more on fuel and food. Falling spending, consumer confidence and immigration add to signs the economy was in a recession in the first half of 2008, which may prompt the central bank to cut interest rates.

``This is confirmation if we needed any that gross domestic product fell again in the second quarter,'' said Doug Steel, senior economist at Westpac Banking Corp. in Wellington. ``There are still a lot of headwinds around and we don't see any real recovery until the fourth quarter.''

The New Zealand dollar bought 75.97 U.S. cents at 11:40 a.m. in Wellington from 76.03 cents before the report.

Consumer confidence fell in July, according to a Colmar Brunton poll for Television New Zealand published today. Fifty five percent of 1,000 people polled last week said the economy will worsen in the next year.

Recession Risk

The economy contracted 0.3 percent in the first quarter and eight of 13 economists say it shrank in the three months ended June 30, putting New Zealand in its first recession since 1998. Reserve Bank Governor Alan Bollard said on June 5 he is likely to cut interest rates this year as the economy slows.

Two of 13 economists surveyed by Bloomberg News say Bollard will lower the official cash rate from 8.25 percent at his July 24 review. Eleven expect a cut in September.

Warehouse Group Ltd., the nation's biggest discount retailer, last month cut its profit forecast by 10 percent, citing slowing sales and margins.

``I don't think there's a household in the country that's not under pressure financially from the burden of these higher food and petrol costs,'' Warehouse Chief Executive Officer Ian Morrice said on June 27.

Adding to the decline in demand, annual immigration growth was near a seven-year low in June, according to a second government report today.

The number of permanent migrant arrivals exceeded departures by 4,732 in the 12 months ended June 30, Statistics New Zealand said. Net arrivals were little changed from a seven- year low of 4,643 in February.

Annual immigration has fallen in 16 of the past 18 months as departures outpaced arrivals, curbing the housing market.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.