Petrol pumps up retail figures

Retail sales were essentially flat in February, clawing back just 0.2 per cent of the cumulative 3.1 per cent decline of the previous four months.

Total sales, when adjusted for seasonal effects, were in the black only because of a 6.7 per cent rise in automotive fuel sales. Average petrol prices rose 15 per cent in February compared with January, though diesel prices were little changed.

Vehicle sales, by contrast, continued to shrink, down 3.2 per cent in February compared with January.

Statistics New Zealand said the trend in vehicle sales had been declining since August 2007 and had fallen 27 per cent over that period to its lowest level since the start of 2001.

Core retail sales, which exclude automotive, fell 0.1 per cent from January despite a 1 per cent rise in what is much the largest store type, supermarkets and groceries.

ASB economist Jane Turner said the survey suggested New Zealanders were enjoying a cheap night in, with a home-cooked meal and a DVD.

Spending in bars and restaurants has been down in recent months.

Meanwhile personal and household goods hiring, of which video stores are a key component, had grown strongly, Turner said, up 9.3 per cent in February after a 9.5 per cent rise in January.

ASB expects retail spending to be relatively flat this year rather than the drag on activity it was last year.

Deutsche Bank chief economist Darren Gibbs expects some pick-up in retail sales this month and in May, because of the tax cuts.

"Still, it is difficult to envisage more than subdued growth over the remainder of this year."

Goldman Sachs JBWere economist Shamubeel Eaqub said the great unknown was job losses. He forecasts the unemployment rate to rise to 7 or 8 per cent, from 4.6 per cent now, but said it might be much worse if historical relationships to employers' responses in business sentiment surveys held up.

ANZ National Bank chief economist Cameron Bagrie said US and Australian unemployment had risen 1.3 and 1.2 percentage points respectively since December. "We strongly suspect the March quarter household labour force survey will show a deterioration of a similar magnitude."