Shoppers snap shut their wallets in May after April sales boom

By NZPA

Tuesday 9th July 2002

Shoppers thought twice about bringing out their wallets in May, resulting in retail sales well below the big spend-up in April.

However, economists said a marked decline in New Zealanders' retail spending for May was to be expected after strong till takes so far this year.

Retail sales fell a greater than expected 1.2 percent for the month, seasonally adjusted, with most types of stores experiencing a decrease, Statistics New Zealand said today.

Analysts polled by Reuters had expected, on average, a fall of 0.7 percent for the month.

That is only the second decrease in seasonally adjusted sales this year -- March sales fell 0.5 percent -- and comes after a rise of 2.5 percent in April, Statistics NZ said.

However, ANZ chief economist David Drage cautioned that the monthly statistics were often volatile, particularly this year as Easter was in March for the first time in years, boosting the number of shopping days in April.

"We believe we've seen in the last month a bit of payback from that strength (in April) with retail sales still easing back a little.

"Certainly if you look at the last few months as a whole, retail spending has continued to increase, albeit at a fairly moderate rate for the period," Mr Drage said.

"We would still expect there would be further growth in spending over the course of the year."

Household incomes were continuing to grow which, coupled with strong net immigration flows, was helping underpin consumer spending. However, balancing that was higher interest rates, and the prospect of some pressure on rural incomes as a consequence of weaker commodity prices and a stronger New Zealand dollar.

However, retail manager at appliances chain LV Martin and Sons, John Lamerton, said sales had been strongest in the rural areas of Manawatu, Waikato, Taranaki and Waikato throughout the year.

In contrast to the official figures, LV Martin's May sales were well up on April, although down on the previous year.

Interest rate rises, such as the three already this year, always had a significant impact on sales, Mr Lamerton said, although weather and school holidays also played a part.

"In my industry, retail is really flat in Wellington, but in other areas it's showing extremely high growth. Retail overall in the consumer electronics area is up about 20 percent," he said.

Deutsche Bank senior economist Darren Gibbs believed sales growth had peaked.

"If such rates of growth were to continue, the 6.25 percent peak in the official cash rate (OCR) that we project would likely prove too low.

"However, in our view, growth in retail sales has already peaked. Indeed, whereas growth over the first half of 2002 has been running at around an 8 percent to 9 percent annualised rate, we expect growth over the second half of 2002 to proceed at less than half of that," he said.

Reasons for weaker sales growth included natural cyclical forces, particularly in durable goods; interest rate rises; and a deteriorating outlook for rural sector incomes.

Ten of the 15 storetypes recorded lower sales in May compared with April, although the largest falls were recorded in motor vehicle retailing (4.2 percent) and department stores (4.7 percent), Statistics NZ said.

The storetypes to record an increase were accommodation/hotels/liquor, recreational goods, cafes/restaurants/takeaways, food retailing, and furniture/floorcoverings.

Actual sales totalled $4.14 billion, compared with $3.82 billion in May 2001.

Statistics NZ said the total sales trend remained positive, despite the monthly fall, and continued a pattern of growth since May 1998.

Waikato had the largest decrease in sales (3.1 percent) of the six regions, while Wellington was unchanged. Sales in the South Island, excluding Canterbury, fell 1.4 percent, and Canterbury sales were down 2.6 percent.

Statistics NZ also released its revised May merchandise export figures today, down 0.8 percent at $3.07 billion compared with early figures released last month.

For the year ended May merchandise exports were revised up 2.7 percent to $32.49 billion, resulting in an annual surplus of $304 million, compared with the provisional $327 million surplus.

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