Sales boost as GST increase spurs shopping spree

Photo / Natalie Slade

A last-minute surge in sales of big-ticket items to beat the GST rise boosted retail sales in September.

A 30 per cent rise in sales of furniture and floor coverings and a 14 per cent rise in appliance sales accounted for most of September's 1.6 per cent rise from August in seasonally adjusted terms.

It follows weak sales in those areas in recent months and ASB economist Christina Leung expects sales to decline again in subsequent months.

"Indeed the latest consumer confidence survey results show a large drop in the number of households considering now to be a good time to purchase a major household time, following the GST increase."

Compared with September last year sales were 3.6 per cent higher, but the automotive sector accounted for most of that. Core sales, which exclude vehicle industries and represent about three-quarters of retail sales, rose 1.7 per cent on an annual basis.

For the September quarter, core retail sales rose 0.9 per cent from the June quarter in both dollar and volume terms.

"This suggests that consumers have again been active in shifting spending towards those sectors where discounts are most prevalent, indicative of the price sensitivity of consumer spending decisions in the current economic climate," Deutsche Bank chief economist Darren Gibbs said.

Goldman Sachs economist Philip Borkin said retail discounting might continue, especially with a high New Zealand dollar making imported goods cheaper.

"However, there is a limit to this given the already strained profitability backdrop from some retailers," he said.

"We expect the outlook for consumer spending to remain somewhat of a slow grind.

"While households have encouragingly been in a period of balance sheet repair and the labour market is showing signs of improvement, we expect a weak housing market to ensure that caution remains the order of the day."

Leung said that beyond the volatility in furniture and appliance sales retail spending was slowly recovering.

"Households look to be more willing to spend on discretionary items, and we expect sales will trend higher over the coming year as the improvement in the labour market underpins consumer confidence.

"Some pockets of weakness remain, as highlighted in last week's weak housing market data."