An optimistic future of New Zealand's Retail Spending - January 2025
New Zealand’s retail sector faces a challenging but hopeful 2025, with stagnant sales and rising operational costs putting pressure on businesses. Despite a 0.5% decline in January sales compared to 2024, retailer confidence has grown, with 70% optimistic about their survival, up from 65% in the previous quarter. Factors like stable inflation (2.2%), potential interest rate cuts, and government economic initiatives may help boost consumer spending. While the first half of 2025 is expected to remain slow, retailers focusing on cost efficiency, digital innovation, and e-commerce growth could see improvements in the latter half of the year.
As 2025 begins, New Zealand’s retail sector is navigating a landscape of mixed signals. While consumer spending remains cautious and business costs continue to rise, retailer confidence in business survival is showing an upward trend. With economic policies expected to shift, the year ahead presents both hurdles and opportunities for the industry.
Retail Sales Remain Stagnant Amid Rising Costs
Data from Stats NZ reveals that total retail sales in January 2025 declined by 0.5% compared to the same month in 2024. This downturn reflects a pattern of frugal consumer spending, which persisted despite the usual surge from Christmas and Boxing Day sales.
Retail NZ Chief Executive Carolyn Young noted that while holiday shopping provided some temporary relief, overall spending remains flat. At the same time, retailers are facing mounting operational costs, including higher insurance premiums, council rates, and wage pressures. These expenses are chipping away at profit margins, leaving businesses with fewer options for investment and expansion.
Despite hopes that inflation-driven price increases and a post-pandemic population boost would lead to greater revenues, these factors have yet to translate into significant growth for most retailers.
Retailer Confidence Shows Signs of Improvement
Even with the challenges of stagnant sales and rising costs, there is a notable increase in retailer confidence. According to the latest Retail NZ Retail Radar survey, 70% of businesses are confident or very confident about their survival over the next 12 months—an improvement from 65% in the previous quarter.
Several factors are contributing to this cautious optimism:
- Stable inflation: The inflation rate has remained steady at 2.2% over the last two quarters, reducing some economic uncertainty.
- Potential interest rate cuts: Many businesses are hopeful that the Reserve Bank of New Zealand (RBNZ) will lower the Official Cash Rate (OCR) to ease financial pressure.
- Government economic policies: The government has signaled a stronger focus on economic growth initiatives that could stimulate consumer spending and business investment.
Predictions for 2025: Will Retail Rebound?
Looking ahead, the remainder of 2025 is expected to be a transitional year for New Zealand retail. While the first half may continue to see cautious consumer spending, several potential shifts could impact the sector:
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Interest Rate Adjustments Could Boost Spending
If the RBNZ reduces the OCR, mortgage holders and businesses may benefit from lower borrowing costs, which could lead to increased disposable income and higher retail spending. -
Tech-Driven Retail Growth
Retailers investing in e-commerce, AI-driven customer experiences, and digital payment innovations may outperform competitors, as online shopping continues to grow. -
Consumer Spending May Increase in Late 2025
If inflation remains controlled and economic confidence strengthens, New Zealanders may feel more comfortable spending on discretionary items by the holiday season. -
Retailers Will Focus on Cost Efficiency
With operational expenses climbing, many businesses will look for ways to streamline costs, including automation, supply chain optimization, and strategic downsizing.
New Zealand’s retail industry faces a challenging but potentially rewarding year in 2025. While sales are currently stagnant and costs are rising, there is growing confidence among retailers that conditions will improve. With interest rate cuts on the horizon and a renewed focus on economic growth, the latter half of the year could see a positive shift in consumer spending.
