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Data Flash (NZ) Retail Sales - February 2001

Data Flash (New Zealand)

Retail Sales - February 2001

Key points

* Total nominal retail sales rose 0.9% mom in February - bang on market expectations - following a revised 0.6% mom decline in January (revised from -0.3% mom).

* Actual sales were just 2% higher than a year earlier, with the annual comparison biased downward due to February 2001 having one less day than February 2000. Adjusting for seasonal effects and differences in the number of trading days, sales were 5.5% higher than a year earlier.

* Nine of the thirteen non-automotive storetypes recorded increased sales. In absolute terms, the largest increase was in food retailing. In proportionate terms, the strongest growth was in the chemist and recreational goods storetypes (up 3.5% mom and 3.4% mom respectively). Excluding motor vehicle sales and services, retail sales increased 0.9% mom.

* Both the motor vehicle sales and services storetypes recorded higher sales in February. Car sales rose 0.7% mom, consistent with registration data which has shown a gradual pick-up in recent months (continued into March). Sales in the motor vehicle services storetype rose for the first time since August last year. Higher petrol prices are likely to be a significant factor underpinning this growth.

* On a regional basis, positive growth was recorded in the Auckland and Wellington regional council areas, and in the South Island. The Waikato regional council area recorded a small fall in sales, but this follows two months of very strong growth (sales remain 10% higher than a year earlier). Monthly data at the regional level are particularly volatile and should be treated with caution.

Commentary

* The rebound in sales in February, following a disappointing January, may indicate that consumer spending has finally begun to respond to a number of positive stimuli including:

* very robust levels of consumer confidence (confirmed again today in a poll in the National Business Review, showing net optimism about New Zealand's economic direction rising from +21 to +36);

* a gradual improvement in the housing market (the sales of Auckland's largest real estate agency, Barfoot and Thompson, rose a further 11% mom in March to a level 34% higher than a year earlier); and

* strong growth in labour and farm incomes (reflecting strong employment growth in H2 2000 and very strong growth in local currency export commodity prices).

* We expect a further increase in sales of around 1% mom to be recorded in March. This view is supported by a further increase in motor-vehicle registrations, strong growth in credit enquires, a further pickup in housing market activity and high levels of consumer confidence (including improved sentiment regarding the purchase of major appliances).

* Our analysis suggests that a 1.0% mom increase in nominal sales in March would result in a 1.8% qoq increase in nominal seasonally adjusted sales in Q1 (the evolution of the seasonal factors is complicated by the impact of last year's leap year). Furthermore, pending the release of the CPI, we estimate that the real trade deflator will increase by around 0.8% qoq in Q1. This implies a strong 1.0% qoq rebound in real retail volumes during Q1, following a 0.5% qoq contraction in Q4 2000. However, at this stage our preliminary estimate for Q1 GDP remains +0.6% qoq, with the agricultural sector likely to make a (temporary) negative contribution to growth following a very strong positive contribution in H2 2000.

Darren Gibbs, Senior Economist

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