Primary sector leads wholesale trade contraction

The March quarter captured the weakness in global dairy prices.

New Zealand's wholesale trade shrank in the first three months of the year, snapping six quarters of expansion, with a decline in goods derived from the primary sector leading the contraction.

Seasonally adjusted sales fell 0.8 per cent in the three months ended March 31, turning around from 0.2 per cent growth in the December quarter, and posting its first decline since June 2013, according to Statistics New Zealand.

On an unadjusted basis, wholesale sales rose 1.8 per cent to $20.92 billion from the same quarter a year earlier and extended its run of growth since December 2009. Stocks held at the end of the period were up 5.2 per cent at $9.6 billion from March 2013.

"Most wholesale industries had falls in sales, with the only increase coming from grocery wholesaling," said Statistics New Zealand business indicators manager Neil Kelly.

Wholesale trade acts as an intermediary between the manufacturer and the consumer, and the survey is typically watched by economists as it feeds into the national accounts and gross domestic product calculations.

Basic materials sales, which includes primary goods such as agriculture products, led the decline, falling a seasonally adjusted 3.2 per cent in the quarter, its first contraction since June 2013.

The March quarter captured ongoing weakness in global dairy prices, which is seen as putting the country's biggest export sector under risk, and as drought conditions were declared in some parts of the country.

Machinery and equipment sales fell 2.6 per cent, motor vehicles and auto parts edged down 0.1 per cent, while other goods, which includes textile and apparel, pharmaceuticals, and furniture and floor covering, dropped 2.3 per cent, and commission-based wholesaling shrank 9.3 per cent.

Grocery-liquor and tobacco products wholesale trade, which accounts for almost a third of all activity, was the only sector to expand in the quarter, advancing 2.8 per cent.

Wholesale drop
•Three months ended March 31.
•0.8% fall in seasonally adjusted wholesale trade.
•2.6% fall in machinery and equipment sales.
•2.8% rise in grocery-liquor and tobacco products.