KEY POINTS:
Retail spending shrank in July as hard-pressed consumers economised.
Total retail sales fell 0.8 per cent, seasonally adjusted, dragged down by very weak vehicle sales, which fell 5.3 per cent.
Statistics New Zealand said vehicle sales had been on a declining trend since September last year and had fallen by a sixth since then.
Petrol prices hit $2.19 a litre in July, a 3.5 per cent rise on June, pushing spending at the pump to levels 28 per cent higher than in July last year.
"That [is a] large increase for household budgets to accommodate so it is little wonder spending has been slashed elsewhere," ASB economist Jane Turner said.
Core spending, which excludes the automotive sector, also went backwards in July, by 0.2 per cent, disappointing financial market expectations of a 0.3 per cent rise. That included a 2 per cent drop in supermarket sales, surprising as food prices rose 0.6 per cent that month.
The fall might prove to be no more than the volatility of monthly data - a 3.1 per cent drop in April was largely reversed by a 2.5 per cent rise in May - but anecdotal reports suggest shoppers have been switching to cheaper options such as own-brand lines, Bank of New Zealand economist Stephen Toplis said.
Compared with July last year overall sales were up 2.5 per cent and core sales up 2.9 per cent - implying lower volumes since inflation is thought to be sitting close to 5 per cent.
