Market Update: We break down the business implications, market impact, and expert insights related to Market Update: New Zealand retail spending beats estimates as economy recovers – Full Analysis.
Policymakers expect homeowners will roll over onto lower home-loan interest rates
Published Mon, Feb 23, 2026 · 10:22 AM
[WELLINGTON] New Zealand retail sales increased more than economists expected in the fourth quarter, suggesting the economic recovery maintained its momentum in the final months of 2025.
Sales adjusted for inflation rose 0.9 per cent from the prior three months, when they surged 1.9 per cent, Statistics New Zealand said on Monday (Feb 23) in Wellington. Economists estimated the gauge, a measure of sales volumes, would rise 0.6 per cent. On a per-capita basis, sales are the highest since the second quarter of 2023.
The fifth straight gain in household spending comes after gross domestic product rose 1.1 per cent in the third quarter last year amid aggressive monetary policy easing. While the Reserve Bank of New Zealand (RBNZ) last week signalled it has finished cutting interest rates, it said that it does not expect to tighten until late this year at the earliest, which is expected to encourage more consumption growth.
Today’s report showed the biggest lifts in spending in the quarter were for electrical goods, hardware and building supplies, and accommodation.
“Looking under the surface, the increase in spending has been centred on discretionary spending areas, which tend to be more sensitive to interest rates,” said Satish Ranchhod, senior economist at Westpac in Auckland. There were also signs of increased hospitality spending which may be linked to the summer vacation period and increased numbers of tourists, he said.
The RBNZ cut the OCR by 325 basis points between August 2024 and November last year, providing stimulus to an economy that had struggled to emerge from a 2024 recession.
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Policymakers expect homeowners will roll over onto lower home-loan interest rates, which will support consumption, although that will be offset by caution as the labour market lags the overall recovery. The jobless rate unexpectedly rose to a 10-year high in the fourth quarter, which is expected to limit wage increases.
The RBNZ also said that it is wary that house prices are languishing, which deprives households of the wealth effect many need to kick start spending. The central bank last week projected property prices may be unchanged in 2026. BLOOMBERG
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