Retail sales rise less than expected

Thursday 13th November 2008

New Zealand retail sales rose less than expected in September, suggesting the central bank's interest rate cuts aren't yet helping to stoke consumer spending.

Retail sales rose 0.1% in September, following a 0.4% gain in the previous month, Statistics New Zealand said. Economists had expected a 0.4% gain, based on the consensus in a Reuters survey. Excluding auto-related businesses, sales fell 0.5% against expectations of a 0.4% gain.

Retailers including Warehouse Group, Briscoe Group, Smiths City and Kirkcaldie & Stains have posted weaker profits or reduced sales, amid signs that the economy's first-half recession may extend through until the end of the year. Department stores and shoe retailers reported the biggest sales drop in the latest month, while sales grew for supermarkets and fresh produce outlets.

Weakening consumer spending is likely to spur the central bank to cut interest rates again next month, with some economists tipping a 75 basis points reduction in the official cash rate. The economy's recession in the first half may extend to a full-year contraction, some economists say.

The NZSE Consumer Index, which hosts the publicly traded retailers, fell 0.6%, with jeweler Michael Hill International down 3.2% and Smiths City dropping 2.7%. Warehouse, which last week reported a 2.1% drop in quarterly sales, declined 0.8% today. The consumer index has tumbled about 40% in the past 12 months.

Adjusting for inflation, sales fell 0.9% in the three months ended September 30, following a decline of 1.4% in the second quarter, according to the government statistician.

Sixteen of 24 store types posted a decline in sales in the third quarter. Auto dealer sales fell 3.1%, supermarket sales declined 1.9%.

By Jonathan Underhill

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