KEY POINTS:
Poor Christmas sales rounded off a weak second half of 2007 for retailers as their customers faced higher interest bills and higher prices for necessities such as fuel and food.
Retail sales at $5.55 billion in December were up only 0.1 per cent, seasonally adjusted, on November, Statistics
New Zealand said.
Among the big three types of retail outlet, supermarket sales were flat, car yards took a 2.4 per cent drop in sales and only filling stations saw their taking rise, 2.7 per cent.
Results for the December quarter as a whole were also subdued.
In dollar terms sales were up 1.9 per cent, seasonally adjusted, the strongest increase since the March quarter's rip-roaring 3.3 per cent growth.
But much of the increase reflected higher petrol prices. Sales of automotive fuels were up 15 per cent in the quarter but only 3 per cent higher in volume terms.
Excluding the automotive sector retail sales in the December quarter did not increase at all in volume terms. The September quarter had recorded only 0.1 per cent real growth.
The rise in food and fuel prices, leaving people less to spend on other things, accounts for much of that.
"However, that things are going flat in spite of an ongoing jobs boom and high wage inflation tells us that more general and more powerful forces of consolidation are at work," sand Bank of New Zealand economist Craig Ebert.
The combined influence of high interest rates and a contracting housing market would act as a restraining influence through this year as well.
ASB chief economist Nick Tuffley said he expected sales volumes to keep trundling along at a similar pace to that seen in the second half of 2007 as higher interest costs and higher transport and food bills kept up the pressure.
Sales volumes for some big ticket categories were soft, such as department store sales, furniture, floor coverings and hardware, though in several cases following healthy sales in the rest of 2007. Consumer confidence was weakening as the slower housing market received widespread attention.
And with house prices expected to dip over this year, the wealth effect - where people borrow and spend on the strength of increased value of their homes - would be reined in.
"The Reserve Bank can afford to remain on hold and let the slowing housing market and high interest rates continue to slow the household sector's contribution to growth and inflation pressures," Tuffley said.
Deutsche Bank chief economist Darren Gibbs said he did not think the retails sales figures would make much of a splash at the Reserve Bank.
The further steep decline in projections for trading partner growth released yesterday was of greater note, Gibbs said.
"At this point trade-weighted trading partner growth in 2008 is expected to be 3.2 per cent, year on year, 0.4 percentage points weaker than when the Reserve Bank assembled its December projections."
Goldman Sachs JBWere economist Shamubeel Eaqub said activity had slowed considerably "and the Reserve Bank has been looking backwards far too much".
"The economy is slowing and the risks are skewed to the downside. We're sticking by our mid-year rate cut forecast."
XMAS BLUES
* Seasonally adjusted total retail sales for December were up 0.1 per cent, compared to November. Core retailing sales were up 0.3 per cent.
* The biggest monthly sales increases were in automotive fuel, up $16 million, and department stores, up 3.1 per cent or $10 million.
* The biggest monthly sales decreases were in motor vehicles, down $17 million, and cafes and restaurants, down $11 million.