Former Economics Editor of the NZ Herald

First retail spend drop in 6 months

Statistics NZ says an early Easter resulted in two less trading days in March. Photo / APN
Statistics NZ says an early Easter resulted in two less trading days in March. Photo / APN

Retail spending charged to electronic cards fell in March for the first time in six months, but statisticians say that could reflect an early Easter.

Retail transactions involving debit, credit or charge cards fell 0.5 per cent from February, seasonally adjusted, and by 0.8 per cent in the core retail sector which excludes petrol stations and car yards.

But Statistics NZ said the fact that Good Friday and Easter Sunday both fell in March this year, resulting in two fewer trading days than in a typical March, was likely to have affected its seasonal adjustment.

For the March quarter as a whole, sales were up by 1 per cent compared to the December 2012 quarter, in which private consumption was strong, and up by 1.2 per cent in the core retail sector.

Deutsche Bank chief economist Darren Gibbs said spending on fuel and hospitality, both up 1.4 per cent on February, would have benefited from the Easter break.

"The weakest store types in March were apparel and durables - the former, at least, probably influenced as much by the long summer, while the latter reversed a strong gain in February," Gibbs said.

"We think that the outlook for consumer spending this year is one of steady growth, despite modest growth in wage and salary incomes, with spending stimulated by the availability of cheap imports, thanks to the elevated level of the exchange rate, and wealth effects associated with rising house prices."

ASB economist Daniel Smith expects to see some rebound in card spending in April as the effects of an early Easter and warm weather are reversed.

Despite steady growth in retail sales, price growth in the sector remained very subdued because of strong competition and the high dollar, he said.

Household debt levels were still high and would restrain spending growth and offset some of the wealth effect of rising house prices.

In this week's quarterly survey of business opinion from the New Zealand Institute of Economic Research, retailers were the least confident sector, with both reported and expected sales down, costs higher and average selling prices lower.

However, the NZIER's principal economist, Shamubeel Eaqub, noted that retailers had increased orders placed overseas.

"This suggests that while they say they expect sales to come back, they don't want to be caught short if demand returns."

- NZ Herald

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