KEY POINTS:
Consumers have been keeping their wallets in their pockets as mounting petrol, food and mortgage costs crowd out spending on other things.
Retail sales in the March quarter did not increase in dollar terms and fell 1.2 per cent in volume terms, the biggest drop in 11 years, Statistics New Zealand reported yesterday.
The steepest fall was at the car yards, down 6 per cent in the quarter in real terms.
In all, 17 of the 24 store types went backwards and most of the rest recorded only modest gains. The big exception was bars and clubs, where sales were up 6 per cent.
In Auckland, sales fell 2.2 per cent in the month of March compared with 1.2 per cent for the country as a whole. Auckland retailers have fared worse than their national counterparts for the past four months.
The figures were seen as strengthening the case for the Reserve Bank to cut interest rates soon. They were worse than the money markets had expected and the dollar immediately lost half a cent against the US dollar.
The dollar's fall highlights the bind consumers are in. It has already fallen about 7 per cent over the past three months as the bad news has piled up: a rapidly cooling housing market, 29,000 jobs lost in the March quarter, dairy prices on the slide.
A weaker dollar makes imported goods more expensive. People can put off buying big-ticket items, but necessities like petrol and food get more expensive as the exchange rate falls.
In the March quarter the dollar value of automotive fuel sales was up 4.7 per cent but there was just a 0.1 per cent increase in volume terms.
Some economists said the figures were not as bad as they looked at first glance - if you ignored the automotive sector and allowed that Easter fell in March this year. Most of them expect it will be September before the Reserve Bank will be ready to start cutting its official cash rate.
And because most mortgage debt is at fixed rates, it will be quite a while after that before most people with home loans feel the benefit.
