KEY POINTS:
Retail sales sagged in April but economists see it as only tentative evidence of the slowdown in consumer spending the Reserve Bank is looking for.
Sales fell 1.2 per cent compared with March when adjusted for seasonal effects. But economists said seasonal adjustment was more difficult in a month which included both Easter and Anzac Day.
And they said the weakness of sales represented statistical "payback" for the exceptionally strong growth of the two previous months: 2.3 per cent in February and and 1 per cent in March.
By the measure retailers themselves prefer - actual sales compared with the same month the previous year - sales were up a robust 7.4 per cent, or 8.1 per cent if the volatile automotive sector is excluded. But the Retailers Association did say the fall was a sign the market was softening.
Vehicle sales fell 4.1 per cent after a 2.4 per cent rise in March. Statistics New Zealand said survey respondents had attributed March's unusually high sales in part to sales of fleet cars.
"After declining between May 2005 and July 2006 the trend in motor vehicle retailing sales has been increasing until recently, but now appears to be flattening," Statistics NZ said.
Appliance sales dropped 4.8 per cent after a fall of 1.2 per cent in March and a 5.4 per cent rise in February.
But most store types recorded flat sales, with movements of less than $3 million compared with March.
Westpac economist Sharon McCaw said that although the softness of the April numbers was probably related to March's increase in the official cash rate there were other factors as well.
These included high petrol prices and a fall in house sales, which reduces demand for housing-related big-ticket items.
The weak out-turn would come as a relief to the Reserve Bank, she said. "They have had so many upside surprises on spending. They will be glad to see one in line with what they were expecting."
But in last week's monetary policy statement the bank said a sustained period of slower growth in domestic activity would be required to alleviate inflation pressures.
ASB economist Daniel Wills said: "It is early days yet and the Reserve Bank will be looking for more concrete evidence, in particular from the housing market."
Trend growth in retail sales at 0.7 per cent a month was still extremely high, he said.
Bank of New Zealand economist Mark Walton said electronic card transactions and vehicle registrations pointed to a rebound in spending in May.
And looking further ahead the bumper dairy payout and hefty increases in Government spending provided plenty of scope for rampant growth in consumer spending for some time yet, Walton said.
But Goldman Sachs JB Were economist Shamubeel Eaqub pointed to falling consumer confidence.
"Three successive increases in the official cash rate and rising bond yields have seen mortgage rates increase significantly."
Even five-year mortgage rates are close to 9 per cent and a full percentage point higher than they were at the end of January.
Petrol prices had risen significantly too.
"We expect the retail sector to face increasing headwinds over the course of the year," Eaqub said.
The New Zealand dollar took a sharp dip after the retail sales data were released but rebounded quickly.
The kiwi dipped a third of a cent immediately after the release of the data. But it closed on US75.06c, up US0.04c on Wednesday's close.
Sales spin
* Retail sales fell 1.2 per cent in April.
* That's the steepest fall since February 2004.
* But retail spending remains high, says Statistics NZ.
* Car yards, hotels and appliance stores recorded the biggest declines.
* Most other types of retailers were flat.
