Biggest jump for retail sales in 3 ½ years

Friday 13th August 2010

New Zealand consumers spent more on recreational items in June, lifting retail sales in the survey’s biggest monthly gain since February 2007. The kiwi dollar jumped on the news.

The seasonally adjusted value of core retail spending, which excludes spending on motor vehicle-related goods, jumped 1.5% in June, according to Statistics New Zealand. That’s almost three times more than the 0.6% forecast in the Reuters survey. Total retail sales climbed 0.9% from the previous month.

“The bounce-back in retail sales for the June month suggests some willingness on the part of households to spend again,” said Christina Leung, economist at ASB.

“The relatively broad-based increase in sales, particularly the decent increase in clothing and footwear sales volumes, suggests a genuine recovery in discretionary spending on the part of households, beyond the bringing forward of sales in anticipation of the GST increase in October.”

The data comes after declining consumer confidence and softer economic data sapped people’s appetite to go and spend their money. The survey is historical and last month’s spending on electronic cards showed a fall in spending, led by lower expenditure on fuel.

The gains were led by a 9.5% jump in expenditure on sporting and camping equipment, toys and games, newspapers and books, photographic supplies and marine equipment.

Quarterly retail sales volumes rose 1.3% and values climbed 0.5%, led by motor vehicle retailing.

The data gave the markets a boost, with the kiwi dollar surging 0.6% to 71.30 US cents on the news. It recently traded at 71.26 cents.

The survey also caused investors to retrace some of their pessimism over the central bank’s track to hike interest rates, with the market pricing in an increase of 65 basis in points the official cash rate over the coming year, according to the Overnight Index Swap curve, up from 60 points earlier today.

Leung said “there is nothing in today's result to suggest that a pause in the OCR is warranted from the RBNZ for the September meeting, especially since we see the current level of the OCR as still well below the neutral rate”.

Businesswire.co.nz

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