NZ Retail sales rise by 1.5% in September quarter!17 November 2014
Q3 real retail sales: 1.5% (Westpac f/c: 1.5%, market f/c: 0.8%)
Q3 real core sales: 1.4% (Westpac f/c: 1.5%)
Annual change: 4.7% (prev: 3.6%)
Real retail sales rose 1.5% in the September quarter, in line with our forecast but well ahead of market expectations for a 0.8% increase. This was the biggest quarterly increase since a 1.9% rise in the June 2012 quarter.
The surprise element for the market (but not for us) is likely to have been the effect of prices. The dollar value of retail spending rose 0.9%, similar to the pace seen in recent quarters. However, the retail price deflator fell by a relatively large 0.6%, due to seasonally weak food prices and the legacy of past strength in the New Zealand dollar. Subdued inflation has helped to give consumers more bang for their buck in the last few years; that will change if the recent softening in the NZ dollar is sustained.
The rise in real sales was spread across 12 of the 15 major storetypes, with the biggest gains coming in furniture and housewares (up 6.3%), recreational goods (up 3.5%) and food and beverage services (up 3%). Clothing sales (down 1.9%) have been a persistent underperformer in recent years, and accommodation spending reversed its 6% jump in the June quarter.
Today’s result is consistent with our forecast of a 0.8% rise in GDP over the September quarter, following a 0.7% rise in the June quarter. Domestic demand has continued to grow strongly, and agricultural output – the lone weak spot in June quarter GDP – has subsequently rebounded.
The New Zealand dollar rose 30pts to 0.7950 on the release. We suspect that over the course of the day the market will realise that the surprise was more about weak inflation than a stronger consumer, and hence the rise in the exchange rate may be unwound. Interest rates were unchanged.
Michael Gordon, Senior Economist, Westpac. Ph: (64-9) 336 5670