Winter chill: Spending down as shoppers respond to rising costs

New data shows retail sales have declined for the second quarter in a row. Photo / Sylvie Whinray

Retail sales have declined for the second quarter in a row, according to new data from Stats NZ.

The much weaker than expected retail volumes raised the risk that New Zealand was in a technical recession in the first half of 2022, said ASB senior economist Mark Smith, although he noted this was still not ASB's core view.

The volume of total retail sales fell 2.3 per cent in the June 2022 quarter, after a 0.9 per cent decrease in the March 2022 quarter when adjusting for price and seasonal effects, Stats NZ said today.

This is the second time retail sales volumes have fallen over two consecutive quarters since the Covid-19 outbreak. The first was in the March and June 2020 quarters.

Without accounting for price effects and seasonal patterns, in actual terms, the value of total retail sales was $28.5 billion in the June 2022 quarter, up 3.8 per cent ($1 billion) compared with the June 2021 quarter.

However, that rise reflects a period of high inflation and ongoing price rises - with annual consumer price index inflation sitting at 7.3 per cent in the quarter.

"The trifecta of soaring living costs, weaker household balance sheets and sluggish population growth are expected to weigh on household spending activity over the remainder of 2022, said ASB's Smith.

"The RBNZ will continue to hike nonetheless and, while a 4 per cent OCR is unlikely to sink the household sector, it will eventually pave the way for OCR cuts."

Ten of the 15 retail industries had lower sales volumes in the June 2022 quarter compared with the March 2022 quarter.

Motor vehicle and parts retailing had the largest fall, down 5.8 per cent in seasonally adjusted volumes, after a 5.3 per cent fall in the March 2022 quarter.

"Some vehicle dealers commented in their surveys that supply issues led to lower sales this quarter," business financial statistics manager Melissa McKenzie said.

"On the 1st of April 2022, more vehicles became eligible for the clean car rebate, and fees came into effect for high emission vehicles. This may also have influenced the peak seen in vehicle and parts retailing in the December 2021 quarter and the fall in the June 2022 quarter," McKenzie said.

Electrical and electronic goods retailing had the second-largest decrease in the volume of sales, down 6.1 per cent; followed by supermarket and grocery stores with a fall of 2.9 per cent; and hardware, building, and garden supplies down 5.3 per cent, compared with the March 2022 quarter.

The largest rises were in food and beverage services, up 3.3 per cent, and accommodation, up 11 per cent.

"The increases in food and beverage services, and accommodation sales volumes coincided with the progressive easing of border restrictions in New Zealand over the quarter," McKenzie said.