Wednesday 14th May 2014
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New Zealand retail sales in the first quarter rose at half the pace of the fourth quarter as consumers held tighter to their wallets amid a slowdown in the housing market and as higher interest rates started to bite.
The volume of retail sales rose a seasonally adjusted 0.7 percent in the first three months of 2014, according to Statistics New Zealand, less than the 0.8 percent expected by economists in a Reuters survey and half the previous quarter's 1.4 percent growth rate.
Retail sales growth is slowing after the Reserve Bank began a cycle of interest rate hikes in March and as the housing market slows in response to restrictions on bank lending to low equity borrowers. The Reserve Bank has more interest rate hikes in the pipeline after raising the benchmark in each of the past two months and expects the hikes will have a quicker impact because many borrowers are on floating rates or have fixed rates coming due soon.
"Consumer spending has lost some momentum compared to last year, perhaps in part a response to a slowing housing market," Felix Delbruck, senior economist at Westpac Banking Corp. in New Zealand, said in a note. "Consumer spending will increasingly become a moderating force for economic growth as interest rates rise and the housing market slows. This may be happening just a bit sooner than we expected."
Delbruck said the weaker retail data suggests "some mild downside risk" to Westpac's first quarter gross domestic product forecast of 1.1 percent. First quarter GDP is scheduled for release on June 19.
The New Zealand dollar edged lower following the retail data, and was trading at 86.27 US cents at midday, from 86.41 cents immediately before the 10:45am release by Statistics New Zealand.
In the first quarter, actual sales were up 3.4 percent in value from the same quarter a year earlier, lagging the 3.7 percent estimate in the Reuters survey of economists.
Excluding fuel and vehicle-related spending, core retail sales in the first quarter rose a seasonally adjusted 0.8 percent from the previous quarter.
Sales in electrical and electronic goods led the quarterly increase in volumes, up 5.5 percent following a 3.7 percent gain in the fourth quarter. Hardware, building and garden supplies rose 2 percent in the first quarter while food and beverage sales increased 1.5 percent.
Meanwhile, sales in supermarket and grocery stores declined 0.7 percent and sales of furniture, floor coverings, houseware and textiles fell 2.4 percent.
Fuel retailing, which isn't seasonally adjusted, fell 0.6 percent in the latest quarter. Vehicle spending rose 0.6 percent.
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