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Retail sales rise less than expected

Wednesday 14th July 2010

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New Zealand retail sales rose less than expected in May, underlining the tepid recovery in consumer spending that has marked the economy’s revival from the deepest recession in 18 years.

Total retail sales rose 0.4% in May, following a 0.3% decline in April, according to Statistics New Zealand. Sales growth of 0.6% had been expected, based on the median in a Reuters survey. Core retail sales, which exclude vehicle-related industries, dropped 0.2%.

The feeble pick-up in retail sales highlights a sense of unease among consumers without the wealth effect they felt at the height of the property boom. One bright spot in the monthly sales data was a 3.9% gain in appliance retailing, which may reflect purchases aimed at beating the increase in GST to 15% in October. That may also be evident in motor vehicle retailer, which jumped 7.5% in May.

“Retail spending continues to recover gradually, with households showing an increased willingness to purchase big-ticket items,” said Christina Leung, economist at ASB, in a note.

“We expect retail sales will increase over the coming months as households continue to bring forward major purchases ahead of the GST increase.”

The New Zealand dollar slipped to 71.79 US cents after the figures were released, from 71.92 cents immediately before. Core retail sales were expected to grow 0.6%, according to the Reuters survey.

Reserve Bank Governor Alan Bollard is expected to lift the official cash rate by a quarter point to 3% at the end of this month though with little sign of a strong rebound in the domestic economy, he may opt for a more modest tightening cycle.

Real Estate Institute figures for June, out earlier today, show the volume of residential homes sold was the second-lowest for the month in a decade.

To be sure, retail sales haven’t collapsed and recent confidence surveys show more consumers deem it a good time to buy a big ticket items while retailers themselves have grown more upbeat. Spending on credit and debit cards, which are published a month quicker than the retail sales data, gained again in June.

Half of the core retailing industries recorded declines in May, paced by the hospitality sector. Café and restaurant sales fell 2% and accommodation sales dropped 3.6%.

Vehicle-related industry sales rose 2.3%, led by sales of vehicles.

Sales at supermarkets and grocery stores, which account for 23% of total sales and are the largest single industry, rose 0.5% in the latest month. Liquor retailing fell 4.3% and takeaway food fell 3.8%.

Businesswire.co.nz



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