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Sharon Zollner, Chief Economist at ANZ, notes that NZ’s retail sales volumes rose just 0.1% q/q in Q1, versus market expectations of 1.0% q/q and in addition growth in the preceding quarter was also revised down from 1.7% to 1.4% q/q.  

Key Quotes

“Annual growth fell from 5.4% to 3.0%.  In per capita terms, real spending fell 0.4% q/q, to be up 1.5% y/y.”

Just under half of the 15 retail industries saw higher sales volumes in the quarter.”

Big-ticket spending was mixed.  Motor vehicle sales fell 0.9% q/q after rising 0.6% in Q4.”

The value of sales rose in 9 of 16 regions.  Southland was a clear leader (+2.4% q/q, building on 1.4% q/q in Q4), with the South Island as a whole (0.9% q/q) experiencing double the nominal sales growth of the North (0.4% q/q). Taranaki sales dropped 1.4% on top of a fall in Q4.”

There are still decent tailwinds for consumer spending:  the strong labour market, expected higher wage growth, low interest rates, stiff retail competition and cheap imports.  However, we expect consumption growth to moderate.  Consumers have a lot of debt already. The household saving rate has run down to unsustainable levels in recent years, and as capital gains in housing peter out nationwide, we expect households to feel the need to rebuild savings buffers. In addition, with visitor arrivals growth slowing, the impetus from international tourists is also likely to cool.”