Retail sales beat expectations

File photo / Richard Robinson

Retail sales were unexpectedly strong in the last quarter of 2011.

In dollar terms sales rose 2 per cent from the September quarter, the fourth consecutive quarter of strong growth, Statistics New Zealand said.

Core sales, which exclude car yards and petrol stations, rose 2.3 per cent seasonally adjusted, driven by supermarkets and grocery stores, food and beverage services, department stores, and electrical and electronic goods stores. Compared with the same period in 2010 sales overall were up 6.6 per cent and 7.5 per cent higher in the core sector.

When adjusted for price changes - mainly falls - real sales were up 2.2 per cent overall, following a 2.4 per cent increase in the September quarter, and up 2.9 per cent for core retailing, the largest increase since that statistical series began in 1995.

The figures were stronger than economists had expected or than electronic card transactions - which declined in both November and December - had foreshadowed.

Just over half the quarter's increase in sales was among food, drink and hospitality providers. These had also recorded strong gains in the September quarter and in both periods were much stronger than had been indicated by the electronic card data. Economists see that as indicating a boost from Rugby World Cup visitors, and a higher than usual proportion of cash transactions.

"However, unlike in the September quarter, there were also strong gains in the durable goods categories," Westpac economist Michael Gordon said.

Electronic goods were up 10.1 per cent in real terms, with firms citing smartphone sales in particular, while furniture was up 7.6 per cent, department stores up 7.2 per cent and hardware and building supplies up 2.5 per cent.

"In most of these cases, volume growth was helped by falling prices, particularly a 3 per cent drop for electronics, partly due to the lagged effect of the New Zealand dollar's gains through last year," Gordon said.

Bank of New Zealand economist Craig Ebert said international forces had had a strong role in delivering higher sales volumes, "whether Queensland's weather in respect to food, the plunging price of electronic goods and technology globally, or the overall strength in the New Zealand dollar".

It was the other side of the coin of the consumers price index falling 0.3 per cent in the quarter.

"It's not as though real demand is weak and needs to be maintained by discounting. Not with annual growth in the region of 6 to 8 per cent."

Ebert expects sales volumes to fall by around 0.5 per cent in the current quarter as the World Cup impact drops out of the figures.

"However, unless there is a massive correction, we're left with a level of real retail spending that far exceeds what all and sundry seemed to be expecting not so long ago."

ASB economist Daniel Smith said the continued recovery in retail spending was very encouraging, particularly as the sector had borne the brunt of the recession.

"The continued recovery in the labour market should underpin an improvement in consumer confidence. We expect this will flow through to a continued recovery in household spending over 2012, albeit at a more gradual pace."