Retail sales unexpectedly drop

Wednesday 14th April 2010

New Zealand retail sales unexpectedly fell in February, led by department stores, appliance retailers and supermarkets, underlining the tepid pace of economic recovery.

The New Zealand dollar dropped after the figures. Retail sales fell 0.6% in February, seasonally adjusted, according to Statistics New Zealand. That followed a revised 0.7% gain in January, weaker than the initial 0.8% estimate published last month. Economists had expected no changed in the latest month.

The sales data comes amid a stubbornly high unemployment rate and a weaker housing market that have combined to sap consumers’ willingness to spend. Excluding vehicle-related industries, retail sales sank 0.9% in March, the second big monthly drop in three. Weak consumer spending may help convince Reserve Bank Governor Alan Bollard that there’s no rush to raise interest rates, which some economists say can be put off until the third quarter.

“Households are quite constrained,” said Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research.

“Everything we have seen so far suggests the recovery is shallow. People are very optimistic about what will happen a year or two down the track but currently (consumer confidence) is neutral.”

The kiwi dollar fell to 70.91 US cents after the report, from 71.33 cents immediately before the figures were released. Shares of Warehouse Group, the biggest retailer on the NZX 50 Index, fell 0.3% to $3.82.

Among store types, department store sales declined 3.3% in February, while appliance retail sales dropped 4.2%. Supermarket and grocery sales slide 0.7% and cafes and restaurants declined 2.1%Motor vehicle retailing fell 1%.

Automotive repairs and clothing and softgoods were the only two industry groups to record increases, at 3.7% and 2.4% respectively. The February figures come a day after the government statistician released spending on credit and debit cards for March, which showed the biggest increase in 28 months.

Eaqub said the card figures are a partial indicator and the disparity may reflect the trend through the recession for consumers to wind back use of cards in favour of cash.

The unemployment rate of 7.3%is the highest since June 1999 and household budgets “are not getting any bigger,” he said.

“Wage inflation will probably slow for the next 12-15 months,” he said.

“There are no pressures in the economy that suggest inflation is going to accelerate. Why would you want to raise interest rates?”

Businesswire.co.nz

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