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Retail sales ease in July

Tuesday 14th September 2010

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New Zealand retail sales dropped in July as people spent less on recreational goods, motor vehicles, and alcohol, while lifting expenditure on groceries.

The seasonally adjusted value of core retail spending, which excludes spending on motor vehicle-related goods, fell 0.1% in July, according to Statistics New Zealand data. That was short of the 0.2% expansion forecast in a Reuters survey, and saw the kiwi dollar drop 0.5% to 72.95 US cents after the announcement. Total retail sales, fell 0.4% or $24 million.

“It was a bit disappointing, but it does follow a substantial increase in June, so over the two months retail spending is up,” said Jane Turner, an economist at ASB.

“There are areas of discretionary spending that are still quite subdued, and it just shows that the recovery is taking a little longer to gain traction.”

Recreational goods, which includes goods such as sporting and camping equipment, toys and games and newspapers, led the core spending lower, falling 7%, or $14 million, from a month earlier. That was followed by motor vehicle sales and liquor retailing.

Turner said the spending decline in tourist related areas was the most disappointing and contrasted the rising number of overseas visitors. Spending in bars and clubs fell $5 million in July, though expenditure in cafes and restaurants rose 4.3% or $14 million, after declines in May and June.

The largest increases were in supermarkets and grocery stores, which rose 1.9% in July or $14 million, the largest monthly dollar value increase since March 2007, though that came in a month when food prices rose 1.3%.

New Zealand has reported a string of soft data in recent months as the economic recovery slows down, and gives Reserve Bank Governor Alan Bollard more reason to pause his tightening track for monetary policy.

Markets are picking Bollard will keep the official cash rate at 3% when he makes a monetary policy statement on Thursday, with the pay-out to depositors in South Canterbury Finance and Christchurch earthquake adding further weights to the economy.

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