Car sales drive retail uptick

Activity in the retail sector rebounded briskly in the June quarter after its post-World Cup contraction in the first three months of the year.

Adjusted for price changes and seasonal effects, total retail sales rose 1.3 per cent following a 0.6 per cent fall in the March quarter, Statistics New Zealand said.

Retail volumes were boosted by a 7.3 per cent rise in sales in car yards, on top of a 5.7 per cent increase in the previous three months.

"The fact that more than two-thirds of the gains in the June quarter came from motor vehicles and parts is a reason to be a bit wary," BNZ economist Doug Steel said. "Still, core retail volumes [which exclude the automotive sector] posted a decent 0.9 per cent increase, which was the pace of core sales growth before the big up and down associated with the World Cup."

Sales volumes in the largest category, supermarkets and grocery stores, rose 0.3 per cent, recovering little of the 3.9 per cent drop recorded in the March quarter. Compared with the June quarter last year, supermarket and grocery store sales volumes were up 1.2 per cent.

In nominal or dollar terms, total retail sales rose 1.1 per cent and core sales 0.7 per cent - less than sales volumes, implying that prices fell overall in the quarter.

The consumers price index, which covers a wider range of prices, rose 0.3 per cent in the June quarter.

Deutsche Bank chief economist Darren Gibbs thinks much of the latest quarter's growth in retail spending reflects increased penetration of imports in light of the high exchange rate and and aggressive discounting.

"Growth in consumer spending appears to have reverted back to a steady upward trend ... with growth broadly in line with growth in labour earnings," Gibbs said.

"Looking forward, we remain concerned that developments in the global economy and prices for New Zealand's key commodity exports, a firm exchange rate and the significant fiscal consolidation that lies ahead could dampen spending and incomes."