KEY POINTS:
The higher cost of necessities is squeezing spending on other things, according to economists picking over the June quarter retail sales data released today.
The data revealed a "consumer recession" and likely confirmed Reserve Bank of New Zealand (RBNZ) thinking on the economy.
"We continue to expect the
RBNZ to cut the official cash rate (OCR) at every meeting into early 2009, taking the OCR down to 6.75 per cent," ASB economists said.
Reserve Bank governor Alan Bollard last month cut the OCR to 8 per cent from 8.25 per cent, the first rate cut in five years.
Retail sales fell a seasonally and inflation-adjusted 1.5 per cent in the June quarter, providing further strong indications that New Zealand is in a recession.
The figure is close to expectations, with the median forecast in a Reuters poll of economists having been for a decline of 1.6 per cent.
The fall in the June quarter followed a decline of 1.2 per cent in the three months to March and was the first time in a decade that volumes had fallen in two consecutive quarters, Statistics New Zealand (SNZ) said releasing the data.
In both the June and March quarters the largest single contributor to the fall in volumes was vehicle sales. The latest quarter's fall in volumes was the largest since the series started in 1995.
"Higher prices for necessities such as food and petrol have squeezed out spending on other discretionary goods," ASB said.
"In addition, the slowing in the housing construction has weighed on housing-related spending."
In the month of June seasonally adjusted retail sales rose 0.9 per cent.
ANZ-National Bank senior economist Khoon Goh said there were no surprises in the data.
"The consumer remains weak and the wallet remains shut," he said.
The underlying trend in retail spending remained weak, with the June month increase boosted by a rebound in car sales and higher fuel prices.
UBS senior economist Robin Clements said the figures "pretty much" ensured June quarter real GDP would fall.
"So we got the recession that is expected, and the Reserve Bank continues to ease (interest rates)," he said.
Two quarters of GDP contraction are considered a technical recession, and in the first quarter it shrank 0.3 per cent.
When just seasonally adjusted, total retail sales fell 0.2 per cent, or $35 million, in the June quarter, compared with the previous three months.
Vehicle sales fell 5.1 per cent, or $102m, in the quarter, with supermarket and grocery store sales down 1.4 per cent, or $51m.
SNZ said that more than offset higher sales in 16 of the 24 retail industries, with the largest increase being a 2.1 per cent, or $37m, rise in automotive fuel.
For the month of June on its own, seasonally adjusted vehicle sales rose 5.2 per cent, or $31m, with fuel up 2.6 per cent, or $16m. The largest decrease was in department stores which dropped 8.7 per cent, or $29m.
- NZPA
