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Data Flash (NZ) Retail Sales - November 1999

Data Flash (New Zealand)
NZ Retail Sales - November 1999
Key Points

Retail sales (nominal, s.a.) rose by 0.1% mom during November, following volatile September (+2.4%) and October (-0.9%) months.

Cutting through the volatility of the seasonally adjusted series, the trend series rose by 0.5% in November.

On an annual basis, retail sales were 6.6% higher than in November 1998.

Within the sectors, furniture and floor coverings (+3.5%), accommodation, hotels and Liquor (+3.1%), restaurants and takeaways (+2.8%) and footwear (+2.3%) made the strongest positive contributions, while hardware (-2.7%), recreational goods (-4.0%) and the automotive sector (-0.7%) recorded a fall in sales. However, with high volatility in the seasonally adjusted aggregate series, the precision of the sectoral series should be treated with caution.

Retail Sales
::::: Total:::Ex auto Total:::Total
:::::::::s.a.::::::::::::::: trend








Source: DB Global Markets Research, Statistics NZ


While the November result was weaker than market expectations of +0.7%, not too much should be read into this result. Information from the retail sector for the December month and the early January period suggest that consumer demand has been and continues to be very strong. That is consistent with the significant rise in consumer confidence recorded by the WestpacTrust survey in December. Anecdotal evidence also suggests that improving sentiment in the farming community as a result of good growing conditions and rising commodity prices is feeding into retail sales in the regional centres.

Overall, we place more emphasis on the December/January evidence than the November result for shaping our view of medium-term household spending trends. We continue to forecast 3% real consumption growth during 2000, consistent with wage inflation of around 3.0-3.5%, employment growth of 2.0-2.5% and farm incomes rising in excess of 10%.

While we do not believe that today's data will have a significant influence on Wednesday's RBNZ decision on the cash rate, it could strengthen the position of those members on the Monetary Policy Committee who are of the view that the economy is not in overheating mode and that a cash rate move is not necessary at this stage. We continue to attach a 60% probability to the RBNZ maintaining the status quo, given the recent upward trend of the NZD, relatively benign inflation outcomes so far, as well as the risk of adverse public and political reaction if the interest rate rise at 9.00 am is followed by a surprisingly low Q4 inflation figure two hours later.

Ulf Schoefisch, Chief Economist


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