Data Flash (NZ) NZ: Retail Trade - May 2000

Data Flash (New Zealand) NZ: Retail Trade - May 2000

Key points

Total retail sales rose 0.8% mom (s.a.) in May, 0.1 percentage points stronger than the provisional estimate released on 21 June. The level of seasonally adjusted sales was 6.6% higher than a year earlier.

Growth in the months of April and March was revised down slightly to 0.1% and 0.0% respectively from 0.3% and 0.1% previously.

A 5.2% increase in motor vehicle sales made the largest contribution to growth during the month, reflecting a bounce back from low sales in April.

Increased spending on petrol - driven by higher prices - also made a significant contribution.

Excluding motor vehicle sales and services, retail sales fell 0.2% in May.

Statistics New Zealand commented that trend measures are now confirming an easing of growth for a number of storetypes. Sales growth was strongest in the Waikato and Canterbury regions, consistent with other indicators such as the ANZ Job Ads series.

Commentary

Based on data for May and April, total nominal sales are likely to have risen by 1% qoq over Q2. We estimate that the majority of nominal growth can be explained by rising prices. Therefore, we expect little growth in volumes to have been recorded.

Continued strong growth in tourism has helped to underpin growth in retail sales. Private consumption, which excludes net tourist spending, fell 0.1% during Q1. Including tourist spending, consumption would have risen 0.3%. The trend towards weaker retail sales remains clear, reflecting the slump in consumer confidence and the downturn in the building sector. A provisional estimate of June sales will be published on 21 July.

A continuation of weak domestic data will put pressure on the RBNZ to leave the OCR on hold in August. However, assuming that confidence data bounces back somewhat over the coming month, we expect the RBNZ to raise rates 25bps on 16 August. The Bank will point to the deterioration in the inflation outlook and the likelihood of a resumption of strong economic growth by the end of this year, the latter driven primarily by a buoyant world economy and a very stimulatory exchange rate.

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