Retail figures get boost from April car sales

Vehicle sales were up 3.5 pc in April, says Statistics NZ

A rise in vehicle sales was a key factor in a 0.5 per cent rise in total retail sales in April, Statistics New Zealand (SNZ) figures show.

Vehicle sales, which can show considerable monthly volatility, rose a seasonally adjusted 3.5 per cent or $18 million in April.

Despite that, the trend in vehicle sales continued downward, having fallen 27.9 per cent since its peak in July 2007, and was now at its lowest level since December 2000, SNZ said today.

Overall the four vehicle-related industries had a $31m increase in April, while core retailing, which excludes the vehicle-related industries, slipped 0.1 per cent or $4m. Department stores recorded a 4 per cent or $12m increase.

Bernard Doyle, strategist at Goldman Sachs JBWere said the latest stats "suggest a slow grinding recovery in the retail sector."
"This is certainly not something the retail sector will be getting particularly excited about. Having said that, at least the deep declines in real spending activity look to be coming to an end."

The outlook for retailing depended crucially on labour market developments in our view, said Doyle.

"In that regard, it is difficult to see explosive recovery anytime soon, with unemployment likely to rise through most of 2009.

However we expect to see a continuation of modest recovery as the impact of low interest rates continues to filter through to household spending."

Doyle said he was "also conscious of the strong link between retail spending activity and the housing market, which has been in recovery since November."

The total retail sales trend had been declining or flat since January 2008, falling 3.5 per cent since then. Since January 2009 the rate of decline had flattened to 0.1 per cent per month, SNZ said.

The core retail sales trend rate of increase had slowed to 0.1 per cent a month in the past two years.

ASB economist Jane Turner said the numbers pointed to "continued caution by the consumer".

The effect of falling household wealth and the outlook for rising unemployment had meant a shift in sentiment, with households either paying down debt or increasing "precautionary savings".

She said the Reserve Bank was relying on a change in consumer behaviour to reduce New Zealand's external indebtedness and so was looking for a slowdown in household spending, along with by slower credit growth to rebalance the economy and reduce our reliance on external debt.

Westpac economist Sharon Zollner said that judging from the figures, some tax cut money was being spent on new cars.

- NZPA