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Data points to pickup in retail sales


Monday 11th July 2011

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Purchases paid for with electronic cards rose strongly in June, suggesting consumer confidence is improving.

Figures from Statistics New Zealand (SNZ) today showed electronic card transactions in retail industries rose a seasonally adjusted 1.2 percent in the month. In May they had fallen 0.7 percent.

Durable goods, including furniture, hardware and appliances, rose 2.4 percent, while consumables gained 1.4 percent.

Fuel retailing was down 3.6 percent in June after falling 4.5 percent in May, coinciding with a fall in fuel prices after nine consecutive monthly rises, SNZ said. The value of vehicle sales rose 1.1 percent.

Core retail, which excludes vehicle-related industries, rose 2.1 percent in June, while the actual value of core transactions was 8.6 percent higher than it was a year earlier.

The total seasonally adjusted value of electronic card spending was up 0.8 percent from May, taking into account changes in the two industries outside retail -- services up 0.8 percent, and non-retail down 0.9 percent.

ASB economist Christina Leung said a particularly strong 4.9 percent rise in apparel spending likely in June reflected the arrival of cold weather.

The 2.4 percent rise in spending on durables was in line with a rebound in consumer confidence seen in recent months, with households noting that now was a good time to buy a major household item.

A 2.9 percent rise in spending on hospitality suggested the services sector was finally on the road to recovery, with the rugby World Cup expected to provide a further boost, Leung said.

Despite the figures pointing to increased confidence about economic conditions ahead, she expected the pace of recovery would be slow, given continued high levels of household debt.

Deutsche Bank chief economist Darren Gibbs said that taking the electronic card spending report at face value, even allowing for some inflation, it seemed likely the volume of retail spending advanced during the June quarter by the most in five years.

That might seem at odds with retail sector anecdote, but the sharp improvement in consumer confidence and a large fall in the unemployment benefit count in June both suggested the economy had a solid month, Gibbs said.

"Maybe the retail sector is continuing to evolve away from traditional store types, especially with the very firm exchange rate and technological advances increasing the attractiveness of internet purchases."

Goldman Sachs economist Philip Borkin said the data was the latest in a growing list suggesting underlying momentum in the economy was finally beginning to improve.

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