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NZ retail sales lag behind forecasts in first quarter, as supermarket sales dip

Friday 14th May 2010

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New Zealand retail sales rose less than expected in the first quarter, indicating a tepid level of consumer activity that’s unlikely to spur the central bank into an early increase in interest rates.

Retail sales rose 0.2% from the final quarter of 2009, seasonally adjusted, according to Statistics New Zealand. That undershot the 0.3% gain forecast in a Reuters survey. Core sales, which exclude auto-related industries, fell 0.5%.

Reserve Bank Governor Alan Bollard said this month that households, faced with soggy house prices, are focusing on repaying debt and building savings rather than lurching back into debt-fuelled spending. He has flagged the prospect of a resumption in hikes to the official cash rate in coming months and economists are divided on whether he will move in June, July or even the third quarter. Since his May 6 speech, government figures have shown the jobless rate unexpectedly dropped to 6% from 7.1%.

“The sluggishness in parts of the domestic economy, where interest rate hikes are likely to gain the most traction initially, reinforces in our eyes that the tightening cycle will be a relatively gradual one, with a pause at some stage before the end of the year,” said Philip Borkin, economist at Goldman Sachs JBWere. “The NZ consumer continues to surprise with its cautiousness.”

The New Zealand dollar dropped to 71.19 US cents after the retail figures from 71.50 cents immediately before the report was released. It declined to 79.40 Australian cents from 79.83 cents.

Sales rose in 13 of the 24 store categories in the first quarter, with vehicle sales rising 4.2%, while supermarket and grocery store sales fell 1.3%. Cafés and restaurants dropped 3.8%.

Retail sales for March rose 0.5%, seasonally adjusted, from the previous month, less than half the 1.1% pace in the Reuters forecast. Core sales climbed 1.1% in March, lagging a forecast 1.4% gain.

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