NZ meals costs fall, spending slows as RBNZ maintains cautious stance

NZ food prices fell 0.6% m/m (prev -0.1%) while retail card spending rose 0.7% (prev 1.4%), showing easing inflation and slowing demand, reinforcing expectations the RBNZ will hold rates steady.

Summary:

• NZ food prices -0.6% m/m (prev -0.1%), annual pace 3.4% – Stats NZ
• Core retail card spending +0.7% m/m (prev +1.4%), signalling slower momentum
• Total card spending +1.3% m/m (prev +1.1%, revised to +1.3%)
• Data points to easing inflation but still-resilient, moderating demand
• RBNZ likely to remain on hold as disinflation continues gradually

New Zealand data showed a combination of easing food price pressures and moderating, but still resilient, consumer spending in March, reinforcing expectations the Reserve Bank of New Zealand will remain on hold.

Food prices fell 0.6% month-on-month in March, a deeper decline than the previous -0.1%, according to Statistics New Zealand. On an annual basis, food prices rose 3.4%, with the category accounting for nearly 19% of the CPI basket. The latest drop adds to evidence that near-term inflation pressures in household essentials are easing.

Retail spending data, however, painted a more nuanced picture. Core electronic card spending rose 0.7% m/m, slowing from a stronger 1.4% increase previously. Meanwhile, total card spending rose 1.3% m/m, matching the upwardly revised 1.3% print for February (initially reported as 1.1%). The data suggests consumption remains supported but is losing some momentum as higher interest rates continue to weigh on households.

Together, the figures point to a gradual cooling in inflation alongside a still-functioning consumer sector, rather than a sharp slowdown in activity.

For the Reserve Bank of New Zealand, the data reinforces a cautious policy stance. Price pressures are easing in some categories, while underlying inflation remains a concern.

The broader economic backdrop remains mixed. Growth has been uneven, with weakness in housing and business investment offset by pockets of resilience in consumption. External risks, particularly from global energy markets, continue to cloud the outlook and could complicate the inflation trajectory.

For now, the moderation in both inflation and spending supports a “wait-and-see” approach from the RBNZ. Policymakers are likely to keep rates unchanged in the near term, looking for clearer evidence that inflation is durably contained without a sharper deterioration in economic activity.