Retail sales leap in quarter

The biggest increase in sales was in food and beverage services, a category which includes cafes and restaurants. Photo / Getty Images

Consumers turned out in force in the June quarter, with core retail sales rising 2.3 per cent in real terms, the fastest clip since September 2011.

When car yards and gas stations are added, total retail sales were up 1.7 per cent in real terms, on top of a 0.9 per cent increase in the March quarter, to be 4.2 per cent up on the June quarter last year.

The biggest increase was in food and beverage services, a category which includes cafes and restaurants, which was up 4.6 per cent, seasonally adjusted, from the March quarter.

"A mixture of good weather and increasing tourist numbers will have contributed to this lift," Infometrics economist Matt Nolan said.

"However, the size of the increase does indicate that underlying discretionary spending by consumers is strengthening."

For Bank of New Zealand economist Craig Ebert the figures attested to soaring house prices and low interest rates spilling over to the wider economy.

Spending on furniture and floor coverings rose 3.5 per cent on the March quarter in real seasonally adjusted terms, while hardware, building and garden supplies rose 3.7 per cent, and electrical and electronic goods by 5.5 per cent, for annual increases of 10.6, 13.9 and 10.9 per cent respectively.

"These are big numbers in anybody's book," Ebert said.

Another indication that housing was a prominent driver was the fact that annual sales growth was strongest where house price inflation is hottest, namely Auckland (5.9 per cent) and Canterbury (5.3 per cent), he said.

Westpac economist Michael Gordon said the data provided more evidence the economy's upturn was now well established and becoming self-sustaining.

"Rising house prices and the Canterbury rebuild are important supporting factors, but it's becoming increasingly difficult to argue that these are the sole causes," he said.

"The retail figures are also another blow to the Reserve Bank's assumption that consumers will be more cautious during this upswing, given already-high debt levels."

In dollar terms spending in the core (non-automotive) categories was up 2 per cent, reflecting prices falling 0.3 per cent.

"The New Zealand dollar over the last year has helped to suppress prices for imported and import-competing goods.

"This effect can only last for as long as the currency continues to rise at a rapid clip.

"The New Zealand dollar trade-weighted index rose about 7 per cent in the year to June," Gordon said.

"We certainly don't expect it to maintain that pace, and it may have even passed its peak."