Retail sales unexpectedly healthy in August

By NZPA

Friday 14th October 2005

New Zealand shoppers revealed an unexpectedly healthy spending appetite in August, official figures show, defying economists' expectations for a slow down.

Retail sales rose by 0.2% in August, Statistics New Zealand said, against economists' predictions for a 0.8% fall.

Today's figures add a little more fuel to the fire ahead of the Reserve Bank's monthly interest rate review on October 27.

Economists are divided on whether the central bank should hike rates, even though inflation - buoyed by high oil prices and consumer spending - is tipped to hit a four-year high of 3.4% in the third quarter.

Nine out of 15 economists polled by Reuters expect the official interest rate to be increased by a quarter-percentage point to a record 7% to combat persistent inflationary pressures in the domestic economy.

Statistics New Zealand urged caution towards today's data, however, as some abnormalities were detected.

Today's rise was driven by the motor vehicle sector, which rose 6.7% on July - the fourth largest increase on record. Fuel prices rose for the sixth straight month, up 2.9%.

If car sales and services are extracted from the data, core sales actually fell by 1.4% during the month.

"In terms of the core things, I think it's in line with what we were expecting," Goldman Sachs JB Were economist Shamubeel Eaqub said.

"Obviously there were big increases in motor vehicle retailing and fuel retailing, presumably mostly to do with oil prices."

He said the data fitted with a broader theme of a slow down in the household sector.

The most notable monthly decline was in the hospitality sector, which returned to normal following the Lions rugby tour in June and July.

Accommodation decreased 6.8%, bars and clubs decreased 8.9%, and cafes and restaurants decreased 4.8%.

Actual sales for the August year were up 9.2%, against economists' expectations for a 6.8% rise.

The New Zealand dollar was little moved by the data, trading at US69.22c compared with its local open of US69.18c.

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