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Retail sales fall, led by department stores

Monday 14th June 2010

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New Zealand retail sales fell in April, led by department stores, indicating there hasn’t yet been a pre-GST-hike pick-up in demand as households continue to deleverage.

Retail sales fell 0.3% in April, seasonally adjusted, after rising 0.5% in the previous month, according to Statistics New Zealand. No change was expected, according to a Reuters survey. Core retail sales, which exclude vehicle-related industries, fell 0.2%, in line with forecasts.

Economists are watching for any signs of a spike in spending, such as on big-ticket items, ahead of the Oct. 1 increase in goods and services tax to 15% from 12.5%, with the underlying trend for a slow improvement as the jobless rate declines and consumers pay back debt. In raising the official cash rate a quarter points to 2.75% last week, Governor Alan Bollard said households and businesses would likely continue to consolidate their balance sheets.

“We continue to look for an ongoing recovery in consumer spending as the labour market stabilises and gradually improves,” said Philip Borkin, economist at Goldman Sachs JBWere. Still, “the rate of spending growth is expected to be below the rate we have become used to over the past decade” and consumer spending will be “more dependent on income growth rather than debt and leverage.”

Department stores led the decline in the latest month, falling 3.3% after a revised 6.7% surge in March and a 3.7% decline in February. Sales at chemists fell 3.6% and automotive fuel retailing fell 1.1%.

Among gainers, accommodation rose 7% and supermarket and grocery store sales gained 0.5%.

Borkin said April marked the first months since November, where core retail sales didn’t miss estimates.

Credit and debit card spending for May were released last week and suggested a “modest recovery” last month, he said.

The value of electronic card transactions in retail industries rose a seasonally adjusted 0.4% last month, from a 0.3% gain in April, according to Statistics New Zealand. Core sales, which exclude motor-vehicle related outlets, rose 1% in the latest month.

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