Cars and liquor bear brunt of 0.4% retail drop

Photo / Hawkes Bay Today

Retail sales fell 0.4 per cent in July, with car yards, liquor stores and recreational goods retailers bearing the brunt.

But core retail sales, which exclude the volatile automotive sector, held on to nearly all of June's strong 1.5 per cent rise, dropping just 0.1 per cent.

Compared with July last year core sales were up 2.1 per cent, and three-quarters of that rise has been in the past six months.

Total sales were up 3.1 per cent on a year earlier.

The Auckland region, which represents a third of national sales, defied the trend, rising 0.5 per cent on a seasonally adjusted basis from June, while sales nationwide fell 0.4 per cent.

In dollar terms the largest increase was recorded by supermarkets and grocery stores. They account for almost a quarter of retail spending.

Their 1.9 per cent increase from June was likely to have been influenced by a surge in food prices in July, Deutsche Bank chief economist Darren Gibbs said.

By contrast, motor vehicle sales fell 2.3 per cent, recreational goods 7 per cent and liquor store sales 9.3 per cent.

ASB economist Christina Leung said that there had been some slowing in vehicle registrations in recent months, which brought into question the sustainability of the recovery in vehicle sales following thesharp declines seen during the recession.

"Nonetheless there is potential for vehicle sales to improve in coming months as households bring forward purchases of major items in anticipation of the GST increase at the beginning of October," she said.

Abstracting from the impact of the Canterbury earthquake, Gibbs expects a lift in retail sales in September, driven by higher volumes ahead of the GST increase, and again in October, driven by higher prices following the GST increase.

"But a more resilient real recovery in consumer spending seems unlikely to be seen until employment and income growth strengthen and household become more comfortable with their levels of debt."