KEY POINTS:
Consumer spending continued to lose momentum in the September quarter as the Reserve Bank's tightening of the monetary screws this year bit harder.
Retail sales were up 0.5 per cent compared with the June quarter, seasonally adjusted, or 1.4 per cent if the volatile automotive sector is excluded,
Statistics New Zealand reported.
But when price rises are filtered out, the underlying increase in volumes was 0.2 per cent for both core and total sales, clawing back only a fraction of the June quarter's declines of 0.9 and 0.7 per cent respectively.
Deustche Bank chief economist Darren Gibbs regards the softness of real retail sales over the past two quarters as statistical payback from the record 3.7 per cent surge recorded in March.
Compared with September last year, sales are 5.4 per cent higher in dollar terms, a figure more in line with the growth in incomes. "Given the slowdown observed in the housing market we do think some softening in spending growth lies ahead. We expect Christmas to be solid but not spectacular," Gibbs said.
"The big question for the Reserve Bank and markets is whether such a slowdown will be sustained through 2008 as rural incomes surge and households receive more details about prospective tax cuts."
ASB Bank chief economist Nick Tuffley said yesterday's numbers were broadly consistent with the Reserve Bank's expectations that consumer spending would start to slow more noticeably.
Coupled with the softening housing market they showed the bank's anti-inflation medicine was taking hold.
"We continue to expect the Reserve Bank can refrain from lifting rates further but that it will be a long wait for lower interest rates," he said.
UBS economist Robin Clements sees few grounds for anticipating a resurgence in the momentum of retail sales any time soon. "The labour market remains tight, and wages are still rising, but employment growth faltered in the September quarter."
Supermarket and grocery stores recorded a 1.6 per cent rise in sales in dollar terms in the quarter and 1 per cent in real terms. Motor vehicle sales were 0.6 per cent in dollar terms and 0.2 per cent in real terms.
Sales in the Auckland region were up 1.5 per cent in real terms on the September quarter last year, compared with a nationwide increase of 5.8 per cent.
Gibbs expects Auckland to underperform the national average over the next year.
Shop talk
* Retail sales rose 0.5 per cent in the September quarter, but only 0.2 per cent in real terms.
* Supermarkets and the accommodation sector posted the largest gains, clothing store and those selling recreational goods the biggest falls.
* The trend in retail spending has been declining since April.