KEY POINTS:
A sharp fall in vehicle sales pulled overall retail sales down a seasonally adjusted 1.3 per cent in October.
When the four vehicle-related industries are excluded, core retail sales actually lifted a seasonally adjusted 0.8 per cent or $34 million, figures published yesterday by Statistics New Zealand show.
The overall 1.3 per cent fall, worth $69 million, was the largest monthly drop since February 2004, and followed an increase of 0.3 per cent in September.
The drop in vehicle sales, amounting to $90 million, was the largest monthly drop in 11 years and followed a 5.9 per cent increase in September.
The trend in vehicle sales had been falling since September 2007, dropping 19.6 per cent in that time and was now at its lowest level since September 2001, Statistics NZ said.
Fuel sales dropped 2.2 per cent or $14 million in October, following a 1 per cent rise in September and a fall of 3.6 per cent in August.
The latest drop in sales was consistent with significantly lower diesel and petrol prices, Statistics NZ said.
The largest increase in October was in appliances, which lifted 7.6 per cent or $15 million, following falls of 1.3 per cent and 2.9 per cent in August and September, respectively.
Within the core retailing industries, supermarket and grocery stores had the largest decrease, falling 1.2 per cent or $14 million, influenced by lower food prices.
Monthly movements in the total retail sales trend had been close to flat throughout 2008 but had been trending down, with October showing a 0.9 per cent fall from the start of the year.
The core retail sales trend had been rising continually since 1995, although since April 2007 the average monthly increase had slowed to a comparatively flat 0.1 per cent, Statistics NZ said.
Goldman Sachs JBWere economist Shamubeel Eaqub said the increase in core retail spending was not surprising, given the significant amount of relief in tax cuts and petrol price falls.
But the decline in the headline rate suggested households were still saving much of those windfall gains.
"While there are some positive influences in play in late 2008, we think the sector will show weakness through to late 2009, due mainly to job losses," he said.
"The need for easing monetary policy and additional fiscal stimulus remains intense, and we think the RBNZ [Reserve Bank] has to cut the official cash rate to 3.5 per cent by at least April 2009."
RBC Capital Markets senior economist Su-Lin Ong said the figures were far worse than expected and showed New Zealand consumers continued to retrench.
"The data also show that the New Zealand economy is in deep recession and the Reserve Bank of New Zealand has a lot more work to do."
Citigroup co-head of market economics Stephen Halmarick said the number was "pretty bad" and was a fair confirmation that the New Zealand economy would be in a deep recession which he expected to last for most of 2009.
- NZPA
