New Zealand retail sales rise below expectations in Q1, consumption growth likely to moderate
Source: FxWire Pro - Commentary / 21 May 2018 10:07:39 America/New_York
New Zealand retail sales volumes came in softer than anticipated in the first quarter of 2018. The retail sales volumes grew just 0.1 percent sequentially, as compared with market projections of 1 percent. The figure for the fourth quarter of 2017 was downwardly revised from 1.7 percent to 1.4 percent. On a year-on-year basis, annual growth dropped from 5.4 percent to 3 percent. In per capita terms, real spending dropped 0.4 percent quarter-on-quarter, whereas it rose 1.5 percent year-on-year. According to an ANZ research report, consumption growth is expected to moderate as households rebuild saving buffers.
Just under half of the 15 retail industries recorded higher sales volumes in the quarter. Clothing sales volumes were subdued, falling 5.1 percent, but this follows previous strong growth. Core retail trade rose 0.6 percent sequentially and dropped 4.2 percent year-on-year.
Motor vehicle sales dropped 0.9 percent sequentially after rising 0.6 percent in the fourth quarter. Meanwhile, furniture and floor coverings rose 2.4 percent, and electrical and electronic goods sales also came in strong, rising 5.4 percent, the sector’s sixth straight quarter of strong growth.
The value of sales rose in 9 out of 16 regions. Southland recorded a rise of 2.4 percent, with the South Island seeing a rise of 0.9 percent experiencing double the nominal sales growth of North that saw a growth of 0.4 percent.
There are still decent tailwinds for consumer spending: the solid labor market, expected higher wage growth, low interest rates, stiff retail competition and cheap imports. But consumption growth is likely to moderate.
“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”, added ANZ.
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