NZ consumers remain subdued ahead of the Xmas stretch

Thursday 12th November 2009

New Zealand’s consumers are still subdued going into the annual Christmas spending splurge, according to government data.

The volume of retail sales, excluding motor vehicles, grew 0.5% in the three months ended Sept. 30 according to Statistics New Zealand’s Retail Trade Survey, slower than the value growth of 0.6%, or $69 million. Total sales volumes rose 0.1%, broadly in line with a Reuters survey predicting zero growth, while values increased 0.5%. Inflation was 1.3% in the quarter. Core retail spending (excluding motor vehicles) was flat in the month of September, while total retail sales rose 0.2%.

“It will be crucial to see how readily the NZ consumer opens its wallet over the Christmas shopping period,” said Ben Potter, research analyst at IG Markets in Melbourne. “A divergence between September and Q3 NZ retail sales supports the RBNZ’s monetary policy stance to keep rates on hold for at least the next 6 months.”

Retailers have borne the brunt of New Zealand consumers’ pessimism as the global financial crisis prompted kiwis to pay down debt and boost their savings. Rising unemployment has kept people weighed on sentiment about the current state of the economy, although surveys show consumers are more optimistic about the coming year.

ANZ National Bank economist Philip Borkin said the flat volumes in the quarterly figures were “pretty much in line with expectations” and while they showed consumer spending was stabilising, “it’s nothing for the Reserve Bank to be worried about” in terms of inflationary pressure.

“There are big headwinds out there in the labour market and in incomes, and households are looking to be deleveraging,” he said. “People are feeling cautiously optimistic about the future, but at the moment this hasn’t seeped into their actual spending decisions.”

Some 14 of the 24 retail industries recorded increased sales values in the September quarter, led by a 1.1% rise in supermarket and grocery stores, or $41 million, a 5.1% increase in appliance retailing, or $32 million, and motor vehicle retailing which advanced 1.9%, or $31 million.

The biggest declines in value came in automotive fuel retailing, down 2.5% or $38 million, department stores, which fell 3.2% or $30 million, and cafes and restaurants, which dropped 2.6% or $26 million.

The value of stock fell 4.6%, or $253 million, in the three months through September compared to the same period a year earlier, the third straight quarterly decline.

Nick Tuffley, chief economist at ASB, said it appeared as though retailers had run down their inventories as demand for their product waned, though the figures “confirm that spending has bottomed out.”

“With confidence improving, and net migration increasing, retailers are likely to look to increase stock levels as demand and confidence improves,” he said.

Businesswire.co.nz

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