Retail sales languishing as spending stays weak

Retail sales started the year at a dawdling pace.

Seasonally adjusted, total sales were 0.8 per cent higher in January than in December, which in turn were 0.4 per cent down on November, Statistics New Zealand said.

But when gas stations and car yards are excluded, the rise was 0.3 per cent - much smaller than the rebound the markets expected after December's 2 per cent decline in core retail sales.

Compared with January last year, when the economy was contracting, core sales were just 1.6 per cent higher.

Service stations posted the largest gain in sales as petrol prices climbed 9c in the course of the month.

Vehicle retailers continued the recovery evident since March last year. But ASB economist Christina Leung said the improvement in vehicle registrations - an indicator of vehicle sales - looked to have plateaued.

Sellers of recreational goods saw sales jump 4.8 per cent, but that only reversed the previous month's decline.

Outside the automotive area, spending remained weak, especially in discretionary areas, with appliance and clothing sales languishing, Leung said.

Deutsche Bank chief economist Darren Gibbs expects the official sales numbers for February to be soft, in light of data on electronic card transactions last month which were down 0.2 per cent in the core retail sector.

"But as always we are conscious of how quickly momentum can turn in a small country like New Zealand," Gibbs said.

Parts of the retail sector were likely to see a lift in activity if the Government confirmed an increase in GST and a reduction in personal taxes when it presented its Budget on May 20.