Four consecutive interest rate hikes this year have started to bite into consumer spending, with retail sales weakening for the second consecutive month.
Retail sales were unchanged in July from June after falling 0.4 per cent in June, Statistics New Zealand said. Economists had been expecting sales to
rise 0.3 per cent, according to a Bloomberg poll.
"The underlying trend is soft and it coincides with what we're seeing in the residential housing market," said ANZ chief economist Cameron Bagrie. Real Estate Institute figures last week showed the number of house sales at a seven-year low.
The weakening retail sales growth comes after four interest rate rises by Reserve Bank Governor Alan Bollard this year in an attempt to cool the domestic economy. Bollard held the rate at 8.25 per cent yesterday.
Bagrie said the economy was undergoing a transition from several years of domestic growth to growth driven by the export sector, but it would be some months until the effects of the higher dairy payout started to flow through to the economy.
Goldman Sachs JBWere economist Shamubeel Eaqub said retail spending will likely soften further this year.
"We believe official data will show increasing evidence of household sector weakness over coming months," he said. "The recent sharp slowing in house sales suggests weakness is likely across retail spending."
Core retail sales - which exclude the vehicle-related industries - fell 0.2 per cent following an 0.5 per cent fall in June.
None of the 24 retail sectors measured by Statistics New Zealand had large moves in July. The largest falls were in recreational goods sales - down 3.7 per cent - and of clothing and softgoods - down 3.8 per cent. The largest gain was in accommodation, up 3.1 per cent.
