Retail sales rebound but optimism muted

Retail sales rebounded in April and there are early indications of more gains last month.

Statistics New Zealand reported sales up 0.7 per cent in April after falling 0.3 per cent in March.

But although it adjusts the figures for normal seasonal variations, that does not compensate for the fact that this year all of Easter fell in March for the first time in eight years, boosting April's figures at the expense of March.

The "Easter effect" following on from the timing of Christmas and New Year has made the monthly retail sales figures hard to interpret for several months now.

But UBS chief economist Robin Clements said averaging the two months gave a monthly growth rate of only 0.2 per cent, which also held true if the erratic automotive sector was excluded.

That was a considerable step down from the 1.5 per cent growth rate recorded over January and February.

Clements said it could be the beginning of the long-predicted slowdown in consumer spending, but more data was needed before that could be confirmed.

ANZ National Bank economists in a note on the data said the outlook for disposable incomes and retail sales was still solid.

Even with employment growth moderating to 1 per cent, wages growth of 4 per cent to 4.5 per cent and the Government's Working for Families package should see annual retail sales growth rates about 6 per cent over late 2005 and into 2006. That would be in line with its average in the first four months of the year.