We're still spending - because we're cold

An economist says winter clothes are a big factor in the rise of retail sales. Photo / Herald on Sunday

Retail spending in May showed the biggest monthly growth in more than 18 months, but economists are warning against reading too much into the rise.

BNZ chief economist Tony Alexander told the Herald the splurge in spending was positive, but he did not expect the sudden growth to continue.

Retail spending would continue to rise, "but not at this same sort of pace".

May spending figures might have been up because it had been a particularly cold winter and people had bought clothing to keep warm, he said.

Mr Alexander's comments follow a Statistics New Zealand retail trade survey showing a $41 million (0.8 per cent) increase in May retail sales on April - the largest increase since November 2007.

November 2007 sales were up 1.5 per cent on the previous month.

Total retail spending for May was $5.42 billion, up from $5.379 billion in April.

The survey results - issued yesterday - cite supermarket and grocery store sales (up $27 million) and clothing and softgoods sales (up $25 million) as the two largest contributors to the rise.

Clothing and small appliance purchases are proving popular, but shoppers appear to be holding back on bigger purchases.

Automotive fuel sales and motor vehicle sales were down $14 million and $10 million.

Retailers Association chief executive John Albertson said any growth in the current market was positive, and the May figures were a "reasonably good result".

May was a critical month in winter business, and retailers had attracted customers by cutting prices, which had generated much of the clothing sales, he said.

After three months of negative performance, a positive result was "a really good sign".

"It's going to be a bit of a slow grind coming out of a recessionary period, but I think the signs are good."

Mr Alexander said New Zealand's recession had probably ended and some positive growth was expected in the July quarter, but three months of growth were needed before economists would draw any firm conclusions from trade survey figures.

"In the retail sector a lot of operators are still going to struggle and consumers are still going to be relatively cautious with their money - especially on bigger items like cars, fridges, these sort of things.

"It wouldn't lead me to say the worst is over for retailers," he said.

"I would still expect we're going to be facing retail spectres, with empty shops continuing to pop up for the rest of this year."

Mr Alexander said another indication that times were still tough was last week's figures showing a 1.2 per cent decrease in electronic card transactions from May to June.

If the latest retail spending was the start of an upward trend in household spending, then consumer confidence would have also been reflected in increased electronic card transactions, he said.

Mr Alexander's views were also evident in the ASB Business Weekly, which said winter's early start had brought forward winter-related purchases.

The publication said the May results were likely to be a "one off" and predicted a probable fall in June spending.