NZ consumers spend more in June quarter as economic recovery draws closer

Friday 14th August 2009

New Zealand retail sales unexpectedly rose in the second quarter, the first such increase since September 2007, as the country draws closer to climbing out of its deepest recession in more than 30 years.

Sales volumes grew a seasonally adjusted 0.4% in the three months ended June 30, following a record fall of 2.7% in the previous quarter, according to data released today by Statistics New Zealand. Economists predicted the quarterly figure wouldn’t change from the previous period. Sales grew 0.1% in June from a month earlier, against forecasts for a 0.3% decline.

“It points in the right direction, that the economy is closer to exiting the recession, which could happen in the September quarter,” said Philip Borkin, economist at ANZ National Bank. “We’re starting to see encouraging signs a base is beginning to form in retailing.”

Retail sales kept growing in July, with figures this week showing electronic card transactions rose 1.2%. While card transactions rose last month, an increased proportion were on debit rather than credit cards, suggesting consumers may be taking heed of Reserve Bank Governor Alan Bollard’s warning to avoid a return to a borrow and spend mentality. A resurgent housing market prompted Bollard to make the statement in June.

The prospect of rising unemployment will probably restrain growth in consumer spending “for some time yet,” according to Jane Turner, economist at ASB.

The central bank predicts the jobless rate will peak at 7.1% next year from 6% currently.

Core retailing, excluding auto sales, rose 0.2% in the second quarter, with 11 of the 20 industries surveyed advancing.

Appliance retailing gained 3.1%, supermarkets and grocery increased 0.9% and cafes and restaurants climbed 2.5%. Other retailing, such as antiques and used goods, flowers and garden supplies, watches and jewellery, slumped 9% in the three-month period.

The NZSE Consumer Index, which includes the listed retailers, rose 1.4% today and is up 8.4% in the past month. South Island department store Smiths City climbed 6.1% to 35 cents, children’s clothing chain Pumpkin Patch gained 3.3% to $1.90 and Warehouse Group, the biggest retailer on the NZX 50, rose 2% to $4.08.

Retailers wound down their stock over the June quarter, with the actual value held 5.5%, or $310 million, lower than the same period a year earlier, with 15 of the 24 retail industries cutting stock levels.

Borkin said the unwinding of stock came as retailers cut back on imports and sold off their goods as demand dried up with the downturn. “It’s not really surprising that stock was unwound – they were at a high level across the country,” he said.

Motor vehicle retailers slashed stock 24% while department stores cut their holdings 10% and recreational goods reduced stock levels 11%. Clothing and soft goods retailers boosted their stock levels 23%, while supermarket and grocery stores lifted their stock 10% and appliance retailers 13%.

Businesswire.co.nz

Comments from our readers

No comments yet