KEY POINTS:
The retail recession continued in the September quarter with sales shrinking 0.9 per cent in volume terms.
It was the third successive quarter real retail sales declined. And while economists say lower petrol prices and the October tax cuts should provide a boost in spending before Christmas, they
warn of strong and chilly headwinds next year.
In dollar terms, sales at just under $16 billion were 1.2 per cent higher than in the same period last year. Consumer prices had risen 5.1 per cent in the interval.
Of the 24 segments Statistics New Zealand divides the retail sector into, 16 recorded lower sales volumes than in the June quarter. The biggest declines were seen in car saleyards and supermarkets and grocery stores.
The volume of goods passing through supermarket checkouts fell 1.9 per cent, following a 4 per cent decline in the June quarter, but inflation pushed takings up 0.5 per cent nonetheless. Vehicle sales fell 3.1 per cent in real terms.
Statistics NZ said vehicle prices had remained steady between September 2006 and June 2008 but had fallen 3.6 per cent in the September quarter - the steepest quarterly decline for 11 years.
Petrol and diesel sales were down 2 per cent in volume but up 2 per cent in dollar terms. Fuel prices peaked in the quarter.
Excluding the automotive sector, retail sales were down 0.2 per cent, a smaller decline than the June quarter's 0.6 per cent. Among the eight store types that recorded higher sales volumes, only appliance retailers managed an increase of more than $10 million, suggesting a degree of discounting. Sales rose more in volume terms (6.1 per cent) than in dollar terms (5.1 per cent). Sales had been flat or lower in the two previous quarters.
Bank of New Zealand economist Craig Ebert said he was not so sure another contraction in retail sales activity was in store for the December quarter.
Some areas had already suffered large declines over the past year - 13.3 per cent for vehicles, 9.8 per cent for hardware and 15.8 per cent furniture and floor coverings.
"Personal tax cuts and other handouts came into effect on October 1 and far more than this has already been added to disposable incomes via plunging petrol prices [down 25 per cent from their peak]," he said. "They mattered a lot on the way up. They will matter just as much on the way down."
Falling mortgage rates were also offering relief, though more gradually. But the most important driver of consumer spending would be the labour market, and unemployment was set to rise, Ebert said.
Westpac economist Donna Purdue said that while tax cuts, falling petrol prices and lower interest rates would free up cash just in time for Christmas, "come early 2009 we expect the weight of falling house prices, high debt levels and rising unemployment will ensure consumers crawl back into the hole they fell in earlier this year."
