Sales up as retail sector grows fast

Photo / Herald on Sunday

New Zealand retail sales grew faster than economists were picking in the second three months of the year, led by record gains in the hospitality sector.

The total volume of retail sales rose 1.7 per cent, seasonally adjusted, to $17.94 billion in the three months ended June 30, from a 0.9 per cent pace of growth in the first quarter, which was revised up from 0.5 per cent, according to Statistics New Zealand.

That beat the 1.25 per cent growth expected in a Reuters survey of economists. Actual retail sales volumes rose 4.2 per cent in the June quarter from the same period a year earlier, and actual values were up 3.3 per cent to $17.55 billion.

Food and beverage services industries, which consist of cafes, restaurants and bars, led gains, reporting an increase of 4.5 per cent to $1.8 billion, seasonally adjusted, making it the sector's biggest quarterly jump since the series began in 1995. The value of spending on hospitality rose a seasonally adjusted 0.9 per cent to $18.14 billion.

"A record increase in the food and beverage services industry topped off the widespread rise of consumer spending," industry and labour statistics manager Blair Cardno said in a statement.

The New Zealand dollar rose to 79.82 US cents from 79.62 cents immediately before the numbers were released.

ASB Bank economist Daniel Smith said the retail sales lift was "a little stronger than our central forecast but not all that surprising. Even more encouragingly, core (ex-auto) retail sales rose by 2.3 per cent over the quarter."

Strength was focussed in the sectors that were expected - primarily those related to tourism and the housing market.

"Overall, strong consumer confidence, low interest rates and rising house prices should continue to support spending," said Smith.

Pricing pressures in the retail sector remained very subdued, he said.

"However, there is evidence, both in this data and in the Q2 CPI data, that some retailers are cutting back on discounting. The slightly lower NZ dollar should also push up the prices of some imported goods. Pricing pressures are likely to increase, but price growth will most likely remain fairly subdued. We continue to expect the OCR to remain on hold until March 2014."

Electronic cards data, which accounts for about two-thirds of retail sales, had already indicated household spending will likely make a bigger contribution to economic growth in the second quarter, while inflation figures showed retailers trimmed their level of discounting in the quarter, with 14 per cent of stock sold at a lower price compared to 16 per cent in the March period.

The volume of core retail sales, which strip out vehicle-related spending, rose 2.3 per cent to $13.95 billion in the quarter, and the value increased 2 per cent to $13.87 billion.

The volume of spending on fuel fell 5 per cent to $1.59 billion for a 7.5 per cent decline in the value to $1.86 billion, while the volume of purchases of vehicles and parts increased 3 per cent to $2.41 billion, for a per cent increase in value terms to $2.42 billion.

Spending on hardware, building and garden supplies rose 3.7 per cent in volume terms to $1.33 billion and 4 per cent in value terms to $1.35 billion, while furniture, floor coverings, houseware and textile spending advanced 5.4 per cent in volume terms to $502 million and 3.2 per cent to $494 million in value terms.

Bubbling property markets in Auckland and Christchurch, which are suffering from a limited supply of new housing, have been under the microscope as the Reserve Bank monitors the risk of rising household credit spilling over into consumer spending.

Today's figures show seasonally adjusted retail sales rose above $4,000 per head of population for the first time since September 2007, at $4,016 in the June quarter.

Retail stocks at the end of the quarter rose 0.5 per cent to $6.35 billion from a year earlier, led by a 23 per cent increase in non-store and commission-based retailing to $113 million, and an 8.5 per cent lift in supermarket and grocery store stocks to $648 million.

Auckland was the biggest gainer across the regions with actual sales up 5.8 per cent to $6.08 billion in the June quarter from a year earlier, followed by a 5.1 per cent lift in Canterbury to $2.4 billion. On a seasonally adjusted basis, Canterbury retail sales rose 0.3 per cent and Auckland gained 1.6 per cent.