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Retail Figures Suggest NZers Being Cautious

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Jan 21 NZPA - New retail figures indicate New Zealanders are being cautious about how they spend the extra money coming from falls in petrol prices and mortgage rates, and from tax cuts.

Figures published today by Statistics New Zealand (SNZ) show that a lift in car sales and supermarket shopping helped keep seasonally adjusted retail sales for November largely unchanged from October.

That came as something of a surprise to economists, with the median forecast in a Reuters poll having been for a decline of 0.9 percent.

Even with sales being stronger than expected, economists were saying they saw nothing in the data to prevent the Reserve Bank making further big cuts to official interest rates when it reviews them next Thursday.

SNZ said vehicle sales continued to be volatile, rising 6.9 percent or $37 million in November after a fall of 14.5 percent in October and a rise of 6.1 percent in September.

Meanwhile, in November fuel sales were down 7.3 percent or $44m, reflecting lower prices.

When vehicle-related industries were excluded, sales rose 0.3 percent or $11m in November, compared to a prediction by economists of no change.

Supermarket and grocery store sales rose 2.6 percent or $32m in November, partly offset by a 6.6 percent or $15m fall in accommodation and a 3 percent or $6m drop in appliance retailing.

ASB economist Jane Turner said households were feeling a little better financially, with lower petrol prices, lower mortgage rates and tax cuts providing a much needed cash injection.

"However, with the employment outlook now looking very cloudy consumers are watching their spending habits a little more closely."

In the context of the tax cuts and markedly lower petrol prices, core sales during October and November should have been strong, she said.

"With growing consumer awareness of global economic woes we expect that consumer spending will remain fairly static into 2009."

Deutsche Bank chief economist Darren Gibbs said the fact headline retail sales were down 1.7 percent from a year ago in seasonally adjusted terms reiterated that households had been quite unwilling to apply savings towards other items.

That was not least because household balance sheets had been significantly eroded by falling prices for housing and financial assets, he said.

He expected continued weakness in retailing with lower mortgage rates and a further tranche of personal tax cuts from April 1 largely facilitating a balance sheet adjustment, rather than eliminating its need.

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