Retail sales unexpectedly fall on auto sales slump

Friday 12th December 2008

New Zealand retail sales unexpectedly fell in October, reflecting a slump in auto sales and a decline for grocery stores and supermarkets.

Retail sales declined 1.3% in October from the previous month, seasonally adjusted, according to Statistics New Zealand. Economists were expecting no change in the month. Motor vehicle retailing sales tumbled 14.5% and excluding auto-related products, core retail sales grew 0.8% percent, in line with expectations.

The trend for retail sales has been flat through 2008, with a 0.9% decline in October from the start of the year. Today's figures suggest tax cuts, lower interest rates and cheaper fuel haven't yet spurred consumers to resume their shopping habit in an economy that has probably contracted for three straight quarters.

"The trend is still pretty weak," said Robin Clements, chief economist at UBS New Zealand. Heading into the peak Christmas season, "retailers are braced to see how bad it is."

Clements' forecast is for a 0.3% contraction in third quarter gross domestic product and no growth in the current three months. He has penciled in 0.1% expansion for the first quarter of 2009 and says the risks are to the downside.

The NZSE index of consumer related companies such as retailers, climbed just 0.01% today. Warehouse Group, the largest retailer on the NZX, fell 0.6% to $3.29.

Hellaby Holdings, whose businesses include shoe stores, today said pretax earnings may fall as much as 26% this year on weakening demand. Shares of Hellaby tumbled 14% to $1.25 and are down about 42% this year.

Today's retail sales figures showed appliance retailing had the biggest gain in October, rising 7.6%. Grocery and supermarket sales declined 1.2%.

Accommodation sales climbed 5.3% and clothing and softgoods retailing rose 5.5%.

By Jonathan Underhill

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