Retail sales rise in August on supermarkets

Monday 13th October 2008

New Zealand retail sales rose in August, paced by supermarket and grocery stores, as food prices rose and the central bank cut interest rates.

Retail sales rose a seasonally adjusted 0.4% last month, from July, according to Statistics New Zealand. That beat the 0.3% expectation in a Reuters survey. Sales dropped 0.7% in July. Core retail sale, which exclude autos and fuel, rose 0.8%.

Prospects for a rebound in consumer confidence and spending are increasing, as the Reserve Bank prepares to cut interest rates again on October 23, petrol prices fall, mortgage rates decline and tax cuts kick in. Still, the gain in August retail sales reflects a 2.7% increase in food prices and the latest Roy Morgan poll shows more people think it is a bad time to buy major household items.

Rising food prices "are not a sign consumers are back in the shops spending their money," said Khoon Goh, senior markets economist at ANZ Bank. "Households are still very, very cautious."

ANZ Bank forecasts Reserve Bank Governor Alan Bollard will cut the official cash rate 100 basis points to 6.5% this month and a further 50 basis points in December, pushing the benchmark rate to 4.75% early next year.

Among retailers on the NZX today, Warehouse Group Ltd. gained 1.2% to NZ$3.44 while clothing chain Hallenstein Glasson Holdings Ltd. declined 1.6% to NZ$2.41. The New Zealand dollar rose to about 61.30 US cents from about 60.55 cents before the retail report was released.

Supermarket and grocery sales, which make up 22% of total retail sales, rose a seasonally adjusted 1.2% to about NZ$1.2 billion in August, the government statistician said. Department store sales rose 2.5% to NZ$330 million and footwear store sales rose 4.6% to NZ$38 million.

Fuel retailing fell 3.3% to NZ$619 million, reflecting lower prices for petrol.

By Jonathan Underhill

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