New Zealand’s Q1 retail sales expand a tad below expectations, consumer spending to grow in future

New Zealand’s retail sales grew slightly below consensus expectations in the first quarter of this year. However, the underlying details recorded a decent result. New Zealand’s retail sales volumes rose 0.8% q/q, as compared with consensus forecast of 1% q/q. Core sales volume, excluding petrol and motor vehicle retailing, grew 1% q/q. The growth was broad-based throughout industries.

Out of 15 retail industries, 11 registered higher sales volumes. Electronic and electrical goods rose 3.8% q/q, contributing the most to the overall retail sales. Meanwhile, non-store and commission-based spending also contributed majorly. It grew 10.2% q/q. This industry continues to register strong growth rates, with spending at a 7.5% quarterly pace.

Region wise, spending continued to quicken in Auckland. The region’s sales growth, on a nominal basis, expanded 1.8% q/q and 9% y/y. However, spending in Wellington, Waikato and Canterbury regions declined. The decline in the two out of three regions partially shows the spill-overs from the sluggish dairy sector.

Retail inflation continues to be benign. Even if there are certain signals that deflationary pressures in retail are fading, the overall price pressures continue to be benign, said ANZ in a research report. Several factors continue to underpin consumer spending. Booming tourism sector, continuous rebound in the labor market, strong growth in population and the declining mortgage rate all support consumer spending.

However, a factor of consumer restraint is expected to continue, especially in the rural regions. However, the above mentioned factors are likely to continue to give path for decent growth in consumer spending in the future. But consumer debt levels are expected to become a constraint at a certain point. New Zealand’s economy is likely to have expanded 0.7% q/q in Q1 2016, added ANZ.