NZ retail sales retain strength

By NZPA

Wednesday 7th August 2002

New Zealanders continued to fill their shopping trolleys in the June quarter, with sales rising by 1.2 percent on the previous quarter.

The Statistics New Zealand figures, adjusted for price movements, were just below average market expectations of a 1.4 percent increase.

Volumes dominated, with seasonally-adjusted sales rising 2.3 percent but prices rising 1.1 percent for the quarter. Price increases were widespread with the only falls occurring in food and appliance retailing.

The figures will give the Reserve Bank food for thought when it decides whether to raise interest rates next week. Strong labour data released earlier this week will be a balancing factor, as will the household labour force survey, the official gauge of employment, due out tomorrow.

Eleven out of the 15 storetypes recorded higher sales during the quarter, with motor vehicle sales and services being the largest contributor.

Actual sales for the quarter were $12 billion, or 8.3 percent higher than for the same period last year, at current prices.

Excluding vehicle sales, the increase was 7.6 percent.

The previous quarter, in which overall sales rose 2.2 percent, had fewer trading days because of an early Easter, with Good Friday and Easter Saturday falling in March instead of the more-usual April. On a monthly basis, seasonally adjusted retail sales in June increased 0.5 percent compared with May, and the core retailing group (which excludes vehicle sales) also rose by 0.5 percent.

Actual sales for the month were $3.858 billion, a 5.5 percent increase on June last year, or 5.8 percent excluding vehicle sales.

Economists felt the retail growth was still strong but the fact that the pace was slowing meant the Reserve Bank was likely to hold off increasing interest rates next week.

"Growth was still pretty strong, albeit at only half the rate it was in the previous two quarters," noted Darren Gibbs, senior economist for Deutsche Bank.

"It probably has very little impact on the Reserve Bank's decision next week. I think it's a very clear `no move' in the current global environment. The risk-reward for central banks at this point is definitely to sit on their hands."

Donna Purdue, a Westpac economist, agreed.

"It's much as expected and shows spending growth is going along at a good pace. For the Reserve Bank ...the bigger and most important thing is what's going on internationally, and there's a quite a lot of uncertainty and volatility out there."

But with momentum still strong, Westpac is still expecting interest rate increases before the end of the year.

"I think retail sales have been supported by the robust employment growth that we've seen -- people are getting jobs and are happy and willing to spend money even if the wage rates themselves haven't been going up very fast," said John McDermott, the National Bank's chief economist.

"It's reasonably neutral (for the Reserve Bank). I think as we're looking forward...we're going to see some weakness from rural spending as farming comes down from the highs last year on the back of low commodity prices but we'll see retail trade still carry some good momentum in the urban centres on the back of the strong immigration trends we've seen."

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