New Zealand retail sales remain flat in Q3 2018, consumption growth likely to remain moderate

The New Zealand retail sales volume came in softer than expected in the third quarter. Sales remained the same in the quarter, as compared with the expectations of a rise of 1 percent quarterly. The quarter incorporates a stimulus from the Families Package, with a partial counter from increased petrol prices. Annual sales volume growth decelerated to 2.7 percent from 3.1 percent. In nominal terms, spending rose 0.6 percent over the quarter, reflecting increasing prices, especially for petrol.

In spite of unchanged print, a 0.4 percent quarterly rise in the core measure indicates retail spending still has a pulse, but annual growth continued to ease here too. In terms of trend, retail spending growth stayed the same at 0.5 percent, below 2017’s average of 1.2 percent.

Out of the 15 retail industries, nine recorded increased sales volumes in the quarter on a seasonally adjusted basis. In spite of increasing petrol prices, fuel volumes rose 0.5 percent in the quarter. However, this appears to have squeezed out some discretionary spending, with supermarket and grocery spending down 0.2 percent. Furniture, floor coverings, houseware, textiles dropped 1.2 percent, reflecting the recent easing in the housing market.

The sales value dropped in five of the 16 regions. With the exception of Gisborne, declines were mainly concentrated in the South Island. The print released today shows some downside risk to the preliminary forecast for the third quarter GDP growth of 0.6 percent, noted ANZ in a research report.

“Overall, we expect consumption (and retail spending) growth to remain modest from here. High levels of household debt, weakening population growth, moderating consumer confidence, and some wobblier signals around the global backdrop appear to be offsetting the impacts of low interest rates and a strong labour market. We don’t see that balance changing any time soon”, added ANZ.

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