June quarter healthy for retailers

Population growth, led by net migration, is seen as a key driver of spending. Photo / Natalie Slade

Retailers were busier in the June quarter, sales climbing 1.2 per cent in volume terms to be up 3.6 per cent for the year.

Nominal sales at $18.7 billion were up 1 per cent on the March quarter seasonally adjusted (making 3.8 per cent for the year).

But seven of the 15 sub-sectors Statistics New Zealand divides retailers into recorded price falls.

The largest contributor to the 1.2 per cent real increase in retail sales, which compared with a 0.8 per cent rise in the March quarter, was a 3.6 per cent increase in sales of motor vehicles and parts.

Food and beverage services rose 2.7 per cent after a 4 per cent rise in the March quarter.

"This is the second consecutive strong quarter for this category and indicates households are willing to spend on discretionary items like eating out," said ASB economist Nathan Penny.

Accommodation was up 6 per cent on the March quarter, recreational goods rose 3.3 per cent and electrical and electronic goods 2.9 per cent.

"The overall message from the industry breakdown is that while consumers continue to be responsive to bargains, there was a genuine lift in spending appetites in the June quarter, probably supported by reviving tourist demand," said Westpac economist Felix Delbruck.

"Signs of a direct impact of the housing market on retail activity remain mixed. But on balance the data support the idea that the housing market has stabilised, albeit at a slower pace than last year," he said.

"Spending on hardware, building and housing supplies was up 1.5 per cent in the quarter, but the annual trend has slowed from 14 per cent a year ago to 6.1 per cent. And spending on furniture and homewares was roughly flat after two quarters of declines."

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Penny said the continued reported weakness of supermarket sales was a surprise. They increased just 0.1 per cent in real terms after recording declines in the previous two quarters and are below their levels a year ago.

"We struggle to reconcile these numbers with current strength in migration, strong visitor arrivals numbers and overall generally strong level of economic activity. However, the survey sample error for this category is large," he said.

"Supermarket sales aside, the data portray a household sector that is confident without getting carried away.

"For the year, total retail sales volumes are up 3.6 per cent which is healthy, but by no means spectacular. Particularly when compared to the excesses of the mid-2000s, households continue to show some constraint."

BNZ head of research Stephen Toplis expected annual growth in retail sales to remain above 3 per cent until the end of 2015.

"An overarching factor is that population growth, led by net migration, is running hot," Toplis said.

Statistics NZ estimated the population grew by 67,800 people in the year to June, of which net migration contributed 56 per cent. The 1.5 per cent annual increase was the highest growth recorded since 2003.