A Retail NZ survey finds most retailers have shifted from optimism at the start of the year to deep pessimism, with the Middle East fuel crisis now weighing on consumer spending and foot traffic.
Retailers have swung from cautious optimism to deep pessimism in the space of a few months, according to the latest survey from Retail NZ.
The industry body's quarterly survey found 66 percent of retail businesses predict they will not meet their sales targets for the three months to June — a sharp reversal from the mood at the start of 2026. In January and February, strong sales had given the sector reason for hope.
" The start to the year was really strong, with some positive sales in January and February, and that gave us optimism about the year ahead," Retail NZ chief executive Carolyn Young said. "The crisis in the Middle East and the subsequent significant escalation of fuel crisis that has really impacted the whole of New Zealand has meant retailers are now very conservative, very concerned about the economy and consumer confidence."
What's driving the pessimism
The fuel crisis has rippled through the supply chain in ways that go beyond what customers see at the pump. Freight costs have risen, adding to the cost of moving goods in and out of stores. Retailers say they have absorbed what they can, but margins are being squeezed.
Ninety-two percent of survey respondents cited the economy as their most significant concern. Foot traffic in city centres and high street vitality — factors that matter enormously in a country where 85 percent of retail sales happen in physical stores — were the next most-cited worries.
Consumer confidence has fallen noticeably since the fuel crisis escalated. When confidence drops, people tend to defer non-essential purchases, which directly impacts retailers' top line.
How retailers are responding
With costs rising and demand softening, businesses are weighing their options. Fifty-three percent of respondents said they were considering raising prices to cover increased freight and supply costs. Forty-nine percent said they were trying to absorb the hit rather than pass it on to customers — at least for now.
Eighteen percent of retailers surveyed said they were considering cutting staff hours as a way to manage costs. That is a signal worth watching: if employment hours fall, it can create a feedback loop where workers have less disposable income, further softening consumer spending.
What this means for the broader economy
Retail is a large employer in New Zealand, and the sector's health affects suppliers, commercial landlords, and communities up and down high streets across the country. When retailers pull back on hours or freeze hiring, the impact extends beyond the stores themselves.
The Retail NZ survey captures sentiment rather than hard sales data — the actual quarterly results will be the real test of how deeply the fuel crisis has cut into retail spending. But the shift in mood from January to May is notable, and it reflects how quickly external shocks can reshape business expectations in a small, trade-exposed economy like New Zealand's.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.