New Zealand October retail sales fall 0.7% on rates

Tracy Withers, Bloomberg

New Zealand’s retail sales fell for the first time in four months in October as record-high interest rates and a slowing property market curbed consumer spending.

Retail sales dropped 0.7 percent from September when they gained 1 percent, seasonally adjusted, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of 11 economists was for no change.

Reserve Bank Governor Alan Bollard said last week the benchmark interest rate is likely to stay at 8.25 percent for longer because inflation is accelerating. Slowing consumer spending and a weak housing market add to signs he won’t raise rates.

“The noose is being tightening on consumers,” said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. “The Reserve Bank will be reasonably happy. This result is what they really needed.”

New Zealand’s dollar fell to 78.64 U.S. cents at 5:05 p.m. in Wellington from 78.92 cents immediately before the report.

Thirteen of 16 economists surveyed by Bloomberg News say Bollard will leave the benchmark official cash rate unchanged until at least June 30 next year. Two forecast a cut and one predicts an increase.

House sales fell 22 percent in October from a year earlier and it took longer to sell homes, according to a Real Estate Institute report on Dec. 11.

Bollard said last week the housing market “is a big driver of how much spending goes on at home” and he expects the market will keep slowing, which may further curb retail sales.

Sales at Christmas, the busiest time of the year for retailers, may be “tough,” said Jason Wong, director of research and strategy at First NZ Capital Group in Wellington.

“It’s a very tough Christmas trading period,” he said. “It’s looking pretty soft over the next six to 12 months.”

Shares of Hallenstein Glasson Holdings Ltd., New Zealand’s third-largest publicly traded retailer, have slumped 14 percent since it said on Nov. 30 that first-half earnings at its clothing stores may be less than a year earlier amid “tightening demand” in response to record interest rates.

Warehouse Group Ltd., the nation’s largest publicly traded retailer, last month predicted consumer spending will slow. Its sales in the three months ended Oct. 28 fell 1.7 percent because of reduced demand for electronics and outdoor furniture, the company said.

The results “reinforced earlier expectations that retail spending will tighten as discretionary income comes under pressure from macroeconomic factors,” Chairman Keith Smith told the annual meeting in Auckland on Nov. 30.

Prices at gasoline outlets rose to a 13-month high in October, and increased further in November, amid surging world oil prices, according to government figures. Cheese, butter and bread prices have jumped, matching global costs for milk and wheat. The higher cost of these basic items curbs spending on discretionary goods.

In October, sales at 15 of the 24 store categories fell, the statistics agency said.

Sales by vehicle dealers dropped 2.8 percent and made the biggest contribution to the decline in total sales. Sales by fuel outlets rose 3.5 percent from September as prices increased.

Core retail sales excluding auto dealers, workshops and gasoline outlets dropped 1.1 percent from September, also the first decline in four months. Economists expected core sales to be unchanged.

Supermarket and grocery sales, which make up a fifth of all retailing, fell 1.1 percent. Sales from department stores declined 1.1 percent.

Sales by bars, clubs, cafes and restaurants fell, as did purchases from hardware, appliance and footwear stores. Sales of clothing and recreational goods such as cameras, toys and sports equipment increased.