Retail sales volumes took a bigger hit than expected by economists as inflation continues to eat into the spending power of Kiwi households.
Stats NZ data released today showed the total volume of retail sales fell 1.0 per cent in the June 2023 quarter, following falls of 1.6 per cent and 1.1 per cent in the March 2023 and December 2022 quarters.
Westpac senior economist Darren Gibbs said, “Today’s retail spending report highlighted that financial pressures are continuing to eat away at households’ purchasing power, with the value of total spending also declining.”
He said excluding the pandemic, per capita spending fell to its lowest level in four years.
The total value of sales was at $30 billion, down just 0.2 per cent ($60 million).
Total value of actual retail sales was $29b, up 2.5 per cent ($725m) on last year. However, total value of actual stock as at June 30, 2023 was $9.4b, up 0.8 per cent ($75m) on last year.
ANZ senior economist Miles Workman said while the dollar value of retail spending is up, “inflation is still gobbling up a decent share”.
“The widening gap between sales volumes and nominal spend shows that much of the growth has been driven by rising prices,” he said.
Stats NZ found 11 of 15 retail industries had lower sales volumes in the June quarter compared with the previous quarter, with food and beverage services making up most of the drop, down 4.4 per cent.
Price effects were mixed, with motor vehicle and parts retailing up 5.0 per cent ($201m) in value and supermarket and grocery store prices up 1.8 per cent ($117m).
Fuel retailing value was down 7.2 per cent ($184m); the value of hardware, building and garden supplies was down 3.4 per cent ($97m); while food and beverage services were down 2.3 per cent ($91m) in value.
Sales volumes for hardware, building and garden supplies, recreational goods and apparel retail were all down 4.8 per cent.
Workman said the result is weaker than expected and shows households are cutting back on discretionary spending.
Motor vehicle and parts retailing, however, had the biggest jump, up 3.7 per cent this quarter after falling 2.1 per cent in the March quarter.
Stats NZ business financial statistics manager Thomas Cooper said more motor vehicle sales this quarter were likely influenced by incoming changes to the Clean Car Discount scheme in July.
Workman said the result is the first indicator for GDP in the second quarter and shows “downside risk” to ANZ’s forecast of a 0.4 per cent increase.
He said while the Reserve Bank of New Zealand’s interest rate hikes have helped curb economic growth, it still has a “significant inflation problem” that will require households to be squeezed even further.
Gibbs said the drop marks the first decline in core spending since the September 2021 quarter, when spending was hit by the Delta Covid-19 outbreak.
The outlook is even worse when considering retail price hikes of 1.5 per cent over the quarter, he added.
The outlook for retail spending is mixed, Workman said, as migration-induced population growth, recovering international tourism and a tightening housing market will give some stability.
Gibbs said with around $15b of fixed mortgages repricing at higher interest rates each month, the pressure on households will continue to build.
“Unfortunately for households, as the Reserve Bank made clear last week, interest rates are likely to remain at or above current levels for some time yet, and certainly until inflation is much closer to returning to the midpoint of the 1-3 per cent target range,” Gibbs said.
He said while results are weaker than expected, a “short-lived lift in export volumes” drove a small rebound in the June quarter.
“Even so, annual growth in the economy is very likely to have continued to slow in the June quarter and will almost certainly slow further in the September quarter,” Gibbs said.
Alka Prasad is an Auckland-based business reporter covering small business and retail.