Hopeful sign for retailers in January figures

Wednesday 9th February 2011

Retail purchases made with electronic cards surged during January, but better days may still be some way off for retailers.

Statistics New Zealand today said transactions using electronic cards rose a seasonally adjusted 2.2% in January, the largest rise in five years.

For just the retail industries, and for the core retail sector which excludes vehicle-related industries, the increase was 2.4% in both cases.

It was the largest increase in retail since January 2006, and the biggest rise for core retail since December 2002.

The actual value of transactions in the core retail series was up 5.2% in January from a year earlier.

Sales of consumables, including food and liquor, rose 1.3%, while durables such as furniture, hardware, and appliances were up 1.8%.

Goldman Sachs economist Philip Borkin said the figures needed to be put in perspective.

They followed a poor December quarter and timing issues could be involved. His views towards consumption in 2011 were unchanged, he said.

"While disposable income growth looks solid with the help of personal tax cuts, ongoing deleveraging will ensure real spending growth is modest. Pending increases in food and petrol prices will also continue to pressure household budgets."

ANZ economist Mark Smith said the figures suggested that following a poor Christmas shopping season, the retail sector was on the road to recovery.

But he noted that higher consumer prices were likely to have boosted the figures, with petrol up 2.8% in January.

ASB economist Christina Leung said the data was encouraging, but she expected recovery in the retail sector to be gradual.

She suggested the strong January figures could reflect some payback from December's weak result.

Weekends were important for shopping activity, and December only had four weekends, while January had five.

Deutsche Bank chief economist Darren Gibbs said today's report suggested consumer spending improved substantially in January after what had been a disappointing December.

But he pointed out that the data showed core spending in January just was 0.7% higher than November, while the average level of spending in January and December was less than in November.

NZPA

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