Retail booms as school return drives electronic sales

L-R: Wil Talagi, Oliver Chilton, Ryan Dorward, use tablets at Frimley School, Hastings - File photo / Duncan Brown

New Zealand retail sales rose at a record pace in the first three months of 2015 as the start of the school year underpinned demand for consumer electronics such as laptops and tablets.

The volume of sales rose a seasonally adjusted 2.7 per cent in the three months ended March 31, accelerating from a pace of 1.9 per cent in the December quarter, according to Statistics New Zealand.

That beat the 1.5 per cent growth predicted in a Reuters survey of economists. Stripping out vehicle-related spending, retail sales rose 2.9 per cent, led by an 8.9 per cent gain in sales of electrical and electronic goods. The actual volume of sales in the March quarter was 7.4 per cent higher than the same period a year earlier.

"Our discussions with retailers suggest that there's no one thing in particular behind this, but there may be a strengthening back-to-school effect," Stats NZ acting business indicators manager Tehseen Islam said in a statement. "This seems to mean that spending on things like laptops and tablets is having an impact on overall spending at the start of the school year."

The kiwi dollar rose to 75.5 US cents from 75.17 cents immediately before the report was released, on speculation signs of stronger growth will, at the margin, reduce the prospects for Reserve Bank interest rates cuts this year.

Consumer electronics have been under pressure in recent years as technology advances, a strong New Zealand, and intense demand has led to price falls and increased discounting by retailers. The volume of electrical and electronic goods sales was 19 per cent higher than the same quarter a year earlier, while the value rose 7.5 per cent to $664 million.

Warehouse Group, the country's biggest listed retailer, this month reported a 5 per cent increase in sales for the three months ended April 26, saying its 'Red Shed' general merchandise stores benefited from a strong performance during its 'back to school' period.

Consumer confidence has been bolstered by low interest rates, cheap petrol and a general recovery in the economy, though recent wage data and tepid inflation has raised some concerns that retail spending might come under pressure if household earnings remained static and figures for electronic card spending showed a slowdown sales in April.

Westpac Bank senior economist Felix Delbruck said the March quarter retail activity was "extremely strong, beating even our top-of-market forecast."

"Part of the reason for the strong growth in volumes was very low retail price inflation," said Delbruck.

He said the NZ dollar rose relatively modestly on the surprise, settling 20-30 points higher.

"This may reflect the mixed messages from the survey - turbo-charged growth, but very low retail price inflation. As such the release is one more illustration of the conundrum the Reserve Bank is currently facing and supports our view that the prospect of OCR cuts this year remains very uncertain. "

Delbruck said today's retail news "was a modest upside surprise - we were primed for the drop in retail prices but the value of spending was even stronger than we had expected. One consequence could be an upgrade to our GDP forecast."

Today's data show the total value of retail spending, which includes price adjustments, rose a seasonally adjusted 1.7 per cent in the quarter, accelerating from a pace of 1.4 per cent in the December period. Stripping out vehicle related spending, the value of sales rose 3 per cent. The actual value of sales rose 5.1 per cent to $19.25 billion in the March quarter from the same period a year earlier.

The volume of spending on supermarket and grocery goods, the biggest component in the data, rose a seasonally adjusted 1.2 per cent in the quarter, for a 2.7 per cent increase in value. On an actual basis, the volume of spending on supermarket and grocery goods was up 2.2 per cent, while the value rose 3.9 per cent to $4.4 billion.

The volume of spending on fuel rose a seasonally adjusted 3.5 per cent in the quarter, while the value was down 5.7 per cent. On an actual basis, the volume of spending on fuel was 7 per cent higher than the same quarter a year earlier, while the value of spending on fuel fell 8.8 per cent to $1.82 billion.

The volume of spending on hardware, building and garden supplies rose a seasonally adjusted 3.9 per cent in the quarter for a 3.6 per cent increase in value, while furniture, floor coverings, houseware and textile spending volumes advanced 3.3 per cent for a 3.1 rise in values.

On an actual basis, the volume of spending on hardware, building and garden supplies was 9.1 per cent higher than a year earlier, for a 9.5 per cent lift in the value of spending to $1.5 billion. The volume of spending on furniture, floor coverings, houseware and textiles advanced 11 per cent in the March quarter from a year earlier, while the value climbed 11 per cent to $514 million.

Accommodation spending got a boost from the Cricket World Cup in the quarter, with the seasonally adjusted volume up 7.1 per cent and the value rising 6.9 per cent. the volume of spending on food and beverage rose a seasonally adjusted 1.2 per cent in the quarter for a 1.9 per cent lift in value.

On an actual basis, the volume of accommodation spending was 14 per cent higher than a year earlier for a 15 per cent rise in the value of spending to $1 billion, while food and beverage volumes climbed 9.3 per cent for a 11 per cent increase in the value of spending to $2.17 billion.

UPDATE: Statistics New Zealand have clarified their figures and the seasonally adjusted volume increase of 2.7 per cent, and the seasonally adjusted volume increase of 2.9 per cent were records in dollar terms. In percentage terms, they were the highest increases since the December 2006 quarter.

The department apologised for any confusion.

See the latest retail stats here: