Rise in Q1 wholesale trade sales points to strong GDP growth

By NZPA

Tuesday 5th June 2007

A jump in quarterly wholesale trade sales, particularly in household goods, adds to the expectation of strong gross domestic product growth, an economist said today.

Seasonally adjusted total wholesale trade sales rose 1.7% in the three months ended March 31, including an 18.6% increase in household goods wholesaling, the largest since the series started in March 1995, Statistics NZ said.

The Wholesale Trade Survey does not directly match the wholesale trade component of production GDP, published on June 29.

However, ASB treasury economist Daniel Wills said today's data supported his forecast for GDP growth in the March quarter of 0.9%, for annual growth of 3.5%.

That followed buoyant retail sales, suggesting consumer spending momentum picked up significantly in the first quarter, he said.

Nevertheless, he did not consider the data enough to prod the Reserve Bank of NZ into action again on Thursday, when it releases its Monetary Policy Statement and interest rate decision.

The Reserve Bank had forecast GDP growth of 0.8%. Treasury said today it expected quarterly GDP growth of 1.0%.

"Recent strong activity data, if sustained over coming weeks, point to the potential for further tightening in July or September," Wills said.

"We remain of the view that the RBNZ will hold the OCR unchanged at 7.75% on June 7 as it awaits a clearer read on the impact of recent tightening in March and April."

In a recent Reuters survey, 13 out of 16 economists polled expected the RBNZ to keep the Official Cash Rate on hold.

Statistics NZ said today that the wholesale trade sales trend increased 6.3% between the December 2005 and March 2007 quarters, after a flat period at the end of 2005.

Of the 16 industry groups monitored, 11 recorded seasonally adjusted rises and five falls during the March quarter.

Seasonally adjusted wholesale trade stocks fell 1.9% in the March quarter to reach $9.7 billion.

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