Sales rise, growth slows

By Brian Fallow

WELLINGTON - Retail sales were stronger than expected in June, but the pace of growth in the sector is slowing.

The $3.22 billion that went through retailers' tills in June was 4.9 per cent up on June 1998, when the economy was still in recession.

Seasonally adjusted sales were 2.9 per cent higher than in May; the market had expected 2 per cent. However, Statistics New Zealand said two-thirds of that increase could be due to trading day effects (variations in the number of week and weekend days in a month), the timing of Queen's Birthday and school holidays.

Over the June quarter, retail sales increased 0.4 per cent, adjusted for inflation and seasonal factors, which was the weakest increase for a year.

The biggest declines were in appliance retailing, hardware and footwear - big ticket items and so the first to feel the pinch in a tightening retail environment.

Motor vehicle sales, on the other hand, were up 2.7 per cent in volume terms in the quarter, reflecting the ongoing effects of the removal of tariffs in last year's budget.

Activity in the hotel sector increased 1.6 per cent, in line with a buoyant tourist market.

WestpacTrust chief economist Bevan Graham said the slowdown in retail volume growth in the June quarter showed that the relatively strong December 1998 and March 1999 quarters contained a large element of catch-up.

"The stimulation of last year's tax cuts and the AMP share giveaway had occurred at a depressing time, when consumer confidence was at its lowest for the cycle."

As confidence returned later in the year, people went out and spent. But in the June quarter, spending had pulled back to a level more reflective of underlying growth, Mr Graham said.

He expects a figure of 0.4 per cent for June quarter gross domestic product growth.

Bank of New Zealand economist Peter Jolly also thinks GDP growth in the June quarter slowed to about half its 0.7 to 0.8 per cent pace over the previous three quarters.

On the inflation front, yesterday's figures show prices in most store types up between 2 and 3 per cent compared with a year ago. The exceptions are motor vehicles, which fell 3.4 per cent, and appliances, which were flat.

The value of stocks retailers held at the end of June was 4.5 per cent up on a year earlier.

Statistics New Zealand said that could reflect optimism or it could mean retailers who had not anticipated the flattening off of sales being left with stock they had expected to sell.