New Zealand Retail Sales Fall, Adding to Case for Central Bank Rate Pause

New Zealand consumer spending fell for the first time in three months in July, adding to the case for central bank Governor Alan Bollard to leave interest rates unchanged this week.

Retail sales declined 0.4 percent from June, when they climbed a revised 1 percent, seasonally adjusted, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of 13 economists was for sales to be unchanged. Core sales, which exclude fuel outlets, auto dealers and workshops, slipped 0.1 percent.

Bollard in July raised the official cash rate for a second straight meeting to 3 percent, while saying the outlook for economic growth had weakened and household spending was subdued. The bank will probably leave borrowing costs unchanged on Sept. 16, according to all 14 economists surveyed by Bloomberg News.

“The recovery under way in the economy has slowed to a crawl,” said Helen Kevans, senior economist at JPMorgan Chase & Co. in Sydney. “It is likely that Governor Bollard will leave the cash rate unchanged, not only this week but at least until December, in order to provide the accommodative policy settings needed to prop up growth.”

New Zealand’s dollar fell to as low as 72.98 U.S. cents from 73.10 cents immediately before today’s figures were released. It bought 73.04 cents at 11:46 a.m. in Wellington. The chance of a quarter-point rate rise this week dropped to 6 percent from 8 percent yesterday, according to a Credit Suisse index based on swaps trading.

Price Cuts

The monthly report doesn’t adjust for price changes and sales growth can slow when retailers lower prices to sell stock as consumer spending declines.

Warehouse Group Ltd., the nation’s largest discount retailer, last week said it lowered prices to reduce stocks of seasonal apparel and home-ware that wasn’t selling.

“It was a very poor winter season,” Ian Morrice, chief executive officer of the Auckland-based company said on a conference call on Sept. 10. “A lot of the discounting has been clearance related, not necessarily demand related. There is certainly no relaxing of the pressure on retailers to try and stimulate demand through discounting on a week-to-week basis.”

Curbing spending, annual immigration declined to a 12-month low in July, according to government figures, and the housing market is weak.

House sales fell for a fifth month in August, according to figures from the Real Estate Institute today. The number of sales fell to 4,287 from 4,411 in July, the institute said in an e-mailed report.

House Prices

House prices rose 0.3 percent following a 1.2 percent decline in July and are just 0.9 percent higher than a year ago, the institute said, citing a monthly index.

“The low number of sales suggests there is not a lot of optimism currently in the housing market,” said Mark Smith, an economist at ANZ National Bank Ltd. in Wellington. “With the Reserve Bank on the sidelines for the next few months, the market might receive some support.”

Retail sales fell at 14 of 24 store categories surveyed in July, led by vehicle dealers, liquor retailers and department stores, today’s report showed.

Department store sales dropped 2.7 percent. Clothing sales and purchases of recreational goods which include sports equipment, toys and books also declined.

Vehicle dealer sales fell a second month, declining 2.3 percent. Purchases from fuel outlets fell for a fourth month.

Supermarkets and grocery stores, which make up about a quarter of core sales, saw receipts surge 1.9 percent, the fifth consecutive gain. Spending at cafes and restaurants also increased.

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

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