New Zealand Q2 retail sales remain stronger than market expectations; consumption growth likely to be modest: ANZ Research

New Zealand’s retail sales for the second quarter of this year remained stronger than market expectations, presenting upside risk to ANZ research’s Q1 GDP estimate of 0.6 percent q/q growth, but there are many partial indicators yet to come.

Looking through quarterly volatility, spending growth is weak on a per capita basis. Consumption growth is expected to be modest, with households constrained and the economic outlook looking less assured.

Retail sales volumes rose 1.1 percent in Q2, versus market expectations of 0.3 percent q/q. This follows an upwardly-revised modest increase of 0.3 percent in Q1, bringing annual growth from 2.8 percent to 3.1 percent. In nominal terms, spending was up 1.3 percent over the quarter.

Today’s release was stronger than expected, but in trend terms retail spending has moderated into 2018. In per capita terms, real spending increased 0.8 percent after falling 0.3 percent in the March quarter. In annual terms, per capita spending is up 1.1 percent, compared with more solid rates seen last year (3.6 percent y/y in June 2017).

"We expect consumption (and retail spending growth) will be modest from here. Household are constrained by high levels of debt, consumer confidence has pared back, and the economic outlook looks less assured, with improvements in the labour market difficult to come by from here. In addition, population growth is expected to continue slowing," ANZ Research commented in its latest report.