Dec. 14 (Bloomberg) -- New Zealand's retail sales gained for a sixth consecutive month in October, adding to signs central bank Governor Alan Bollard may raise interest rates early next year to curb inflation.

Retail sales climbed 0.3 percent from September, when they rose a revised 1.1 percent, seasonally adjusted, Statistics New Zealand said in Wellington today. Economists surveyed by Bloomberg News forecast a 0.1 percent gain.

Bollard on Dec. 7 said there was an increased chance he will raise the benchmark interest rate next year to curb spending, which makes up 60 percent of the $108 billion economy. Rising consumer spending may fan inflation, which is above the 1 percent to 3 percent band Bollard targets.

``An interest rate increase in January is on the cards,'' said Stephen Koukoulas chief Asia-Pacific strategist at TD Securities Ltd. in Sydney, who previously expected no change in borrowing costs.

``The economy is gaining momentum and inflation pressures remain high. The Reserve Bank is very frustrated by the strength of the economy.''

The New Zealand dollar rose to 69.35 U.S. cents at 4:55 p.m. in Wellington from 69.07 cents before the report was released. The yield on a three-month bank-bill futures contract maturing in March closed 3 basis points higher at 7.73 percent as traders increased bets of a boost in borrowing costs. A basis point is 0.01 percentage point.

There is a 56 percent likelihood of a rate increase in January, according to an index compiled by Credit Suisse, based on trading in overnight interest-rate swaps. The probability was 43 percent before today's report.

`Surprising Resilience'

Bollard has kept the official cash rate at a record-high 7.25 percent since December last year. Still, household spending continues to show ``surprising resilience'' and the labor market is ``firm,'' underpinning incomes, he said this month.

Wages for non-government workers including overtime advanced at a record pace in the third quarter, according to a government report on Nov. 6.

New Zealand's jobless rate is 3.8 percent, the fourth- lowest of 27 economies in the Organization for Economic Cooperation and Development that use standardized rates.

From a year ago, retail sales rose 5.9 percent, the biggest annual gain since May, the agency said citing unadjusted figures.

``Today's strong retail numbers supports the case to tighten rates again,'' said Jarrod Kerr, an economist at JPMorgan Chase & Co. in Sydney. ``The consumer in New Zealand is tracking along quite nicely and they're unfazed by the level of interest rates.''

Christmas Sales

Retail sales may accelerate as the nation enters the busy Christmas season. Debit and credit card transactions surged 12 percent in the first week of December from a year earlier, said Electronic Transaction Services Ltd., whose payments system handles about three-quarters of retail transactions.

``We're expecting strong sales over Christmas for Starbucks and KFC,'' said Vicki Salmon, chief executive officer at Restaurant Brands New Zealand Ltd., which owns the local franchises.

Sales in half of the 24 retail categories surveyed by the statistics bureau increased in October. Sales at supermarkets and grocery stores, which make up a fifth of all retail spending, gained 1.1 percent from September when they advanced 1 percent, the agency said.

Sales at department stores and accommodation outlets rose, as did purchases of toys, sports gear and other recreational equipment, the agency said. Sales of clothing and furniture fell.

Vehicle dealer sales increased 4 percent. The trend in spending on cars may have stopped declining, the agency said. Fuel retailing fell 3.4 percent from September, when they dropped 3.7 percent. Fuel prices have been falling since August.

Excluding sales through auto dealers, workshops and gasoline outlets, retail spending increased 0.2 percent from September, when it rose 2.3 percent.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

Last Updated: December 13, 2006 22:58 EST