New Zealand retail sales unexpectedly increased in the third quarter, bolstering the case for central bank Governor Alan Bollard to resume raising interest rates early next year.
Sales, adjusted for inflation, gained 0.7 percent from the second quarter, when they rose a revised 1.5 percent, Statistics New Zealand said in Wellington today. The median estimate of 13 economists surveyed by Bloomberg News was for no change.
Stronger-than-forecast consumer spending and an improvement in employment add to signs Bollard will raise the official cash rate in the first quarter next year as the expansion picks up. Income-tax cuts on Oct. 1 and rebuilding after the worst earthquake in eight decades rocked Canterbury province are expected to bolster the recovery.
“We are seeing a continuation of a gradual recovery in spending,” said Christina Leung, an economist at ASB Bank Ltd. in Auckland. “Households look to be more willing to spend on discretionary items and we expect sales will trend higher over the coming year as the improvement in the labor market underpins consumer confidence.”
The nation’s currency rose as high as 77.82 U.S. cents after the report from 77.50 cents immediately before the release. It bought 77.50 cents as of 12:51 p.m. in Wellington.
New Zealand’s unemployment rate fell to 6.4 percent in the third quarter from 6.9 percent in the previous three months as employers added 22,000 workers, twice as many as economists expected, according to a government report on Nov. 4. Wage inflation accelerated for a second straight quarter in the three months through September, a government report Nov. 2 showed.
All 14 economists surveyed last month by Bloomberg expect Bollard will keep borrowing costs on hold until March.
Consumer confidence in October was at a 14-month low while house prices fell for a second month, the Real Estate Institute said in a report on Nov. 11. From a year earlier, housing prices fell 3.5 percent, the Auckland-based institute said.
Warehouse Group Ltd., the nation’s biggest discount retailer, last week said sales fell 0.2 percent in the 13 weeks ended Oct. 31 from a year earlier. The Auckland-based retailer said the retail market continues to be “highly promotionally driven” as rivals cut prices to boost volumes.
“We are not yet seeing signs of any real or sustainable recovery in consumer spending,” Warehouse Group Chief Executive Officer Ian Morrice said in a statement sent to the stock exchange.
Sales advanced at 16 of 24 store categories surveyed in the second quarter, today’s report showed. Purchases at furniture and flooring stores surged 5.7 percent. Appliance store sales rose 4.3 percent.
New Zealand increased its rate of goods and services tax to 15 percent from 12.5 percent on Oct. 1, which prompted increased spending on household appliances, furniture and other items before prices gained, the statistics agency said.
“Ahead of the GST rise, people went out and bought coffee tables and televisions as you might have expected,” said Darren Gibbs, chief New Zealand economist at Deutsche Bank Ag in Auckland. “If you take that, there wasn’t that much spending at all and what there was, was very price sensitive.”
Core third-quarter sales, which exclude vehicle dealers, fuel outlets and workshops, rose 0.9 percent, matching the increase in the three months through June. Vehicle retailing and sales at fuel outlets both fell in the quarter.
In September, sales rose 1.6 percent from August. That was more than the 1.1 percent median forecast by economists. Core sales increased 1.6 percent.
Furniture and floor covering sales surged 30 percent from August. Appliance sales gained 14 percent.
Sales in Canterbury province rose 0.1 percent after the magnitude 7 earthquake which struck the region on Sept. 4.