Apparel spend bounces back in retail figures

Business Reporter·NZ Herald·

11 Aug, 2015 05:00 PM3 mins to read

Shoppers racked up some decent sales figures last month. Photo / Chris Gorman

Electronic card sales up for third month but economists are expecting a slowdown.

A surge in apparel spending has boosted New Zealand's total electronic card sales figures for the third month in a row, however this growth is likely to slow, according to economists.

Core retail spending, which removes fuel and vehicle-related sales, was up 6.6 per cent from July last year with a lift in all industries except durables, which remained unchanged at $1.1 billion.

After four months of declining figures, apparel rose 3.6 per cent to $295 million while consumables, the largest retail measure, rose 0.2 per cent to $1.7 billion and hospitality gained 0.7 per cent to $796 million.

ASB economist Kim Mundy said the total card spending for the month was largely in line with market expectations, but added that growth was likely to slow.

"The July spending data continues to indicate household spending growth has passed its peak," Mundy said. "We expect it will slow further from here as confidence wanes, particularly in the dairy regions. That said, spending is slowing from high to average rates of growth."

Mundy said gradual improvement in the labour market and in disposable income growth would help support modest growth in domestic demand over the rest of the year, with strong tourist numbers generating additional spending in New Zealand.

The slowdown in consumer spending growth was most apparent in consumables, durables and fuel, with Mundy saying durables spending was typically tied to new housing construction and house sales, with the slowdown possibly reflecting softer growth in housing construction over the past few months.

ANZ senior economist Mark Smith said the expected further slowdown could prove difficult for the retail sector.

"Stripping out the impact of higher fuel spending reveals a sizeable moderation in retail spending growth since the start of the year," Smith said. "With household income growth set to moderate further, the second half of this year will be challenging for the retail sector."

Business, consumer and farmer confidence has declined as dairy prices remain lower for longer.

However, a weaker dollar is aiding exporters, while the economy is getting a boost from construction in Canterbury and Auckland, and strong inbound migration and tourists.

"While high levels of migration and strong tourist demand continue to provide support, consumer confidence has clearly come off the boil and is likely to fall further as the shock of lower dairy prices percolates through the economy," said Felix Delbruck, senior economist at Westpac Bank.

Overall, the total retail sector rose 0.4 per cent to $4.7 billion, for an annual gain of 5.6 per cent.

There were 105 million transactions in July, with the average value of transactions at $50, with 55.7 per cent putting purchases on their debit cards.