KEY POINTS:
High interest rates and rising petrol prices are being blamed for shoppers spending less at the checkout.
The biggest falls, according to figures for October released today, were in car sales, supermarkets, grocery and appliances.
Two-thirds of the retail industry recorded declining sales over the period, Statistics New Zealand's report said.
Overall, seasonally adjusted retail sales declined 0.7 per cent in October after climbing 1 per cent in September.
Sales, excluding the motor vehicle component, fell 1.1 per cent. Fifteen of the 24 industries in the survey recorded lower sales.
"Looking at the underlying trend, there is softness in retail spending," said ANZ senior economist Khoon Goh, who expected a 0.4 per cent decline in total sales.
"This is no surprise with high interest rates and petrol prices."
Mr Goh said the decline in retail sales could be a reflection of the number of New Zealanders who went overseas that month for the Rugby World Cup.
Discount retailer The Warehouse Group recorded a 1.7 per cent fall in sales for the three months ending October 28 due to "challenging" conditions.
Hallenstein Glassons profit in New Zealand also had a rough ride with full year profit also down on a year ago. The company's shares have slumped 31 per cent this year. Shares of Hellaby Holdings, owner of Hannahs Shoes and Number 1 Shoe Shop, have more than halved since the start of the year.
Sales in the Auckland region and Waikato area - which the largest falls in housing turnover - gained 0.8 per cent and 0.9 per cent respectively from the year earlier period.
According to Deutsche Bank, higher earnings for farmers will support consumer spending in the rural areas next year.
Fonterra, the world's biggest dairy exporter, today boosted its farmer payout for the current season by 50 cents to a record $6.90 for every kilogram of milksolids.
"Given rising dairy incomes, we think that spending in the Waikato will rise robustly in 2008," Deutsche Bank chief economist Darren Gibbs said.
Mr Gibbs said the Reserve Bank will view today's retail figure as "good news" because it cemented the view that the slowing housing market filtering through to other parts of the local economy.
However, inflationary risks will probably see the official cash rate remain at a record 8.25 per cent for most of 2008, with scope for a rate cut towards the end of year, he said.
The central bank kept interest rates at a record high last week amid concerns about inflation, which it predicts will next year breach its targeted 1 per cent to 3 per cent.
