Retail Spending Rises In April
• Spending by BNZ debit and credit card holders in seasonally adjusted terms is estimated to have risen 0.8% in April. Following our estimate of a 0.5% fall in retail sales in March this suggests a flattening out of spending in the past two months following strong growth.
High performing regions recently have been Waikato, Gisborne, Manawatu/Wanganui, Canterbury and Otago, while spending restraint is evident in Auckland, Taranaki, and the • In unadjusted terms ex-auto sales in April were estimated to be up 7.0% from a year ago, Just as March retail spending was probably biased down slightly this year by Easter falling entirely in the month, so too do we think April spending was consequently biased upward slightly.
For this reason we advise against relying too heavily on what monthly data are showing and instead looking at movements averaged over a period of months. Doing this we conclude that taken together the 0.5% fall in seasonally adjusted retail spending over March and 0.8% recovery over April suggest spending growth has flattened off after a stellar period in the first two months of the year.
CONSUMER SPENDING PROSPECTS
There is some solid underpinning to retail spending from low fixed interest rates, recent rises in house prices, and a strong labour market delivering increasing expectations of faster wage rises. However there are some signs that while high levels of retail spending are being maintained the rate of growth in spending may be slowing down. Our measure using BNZ debit and credit card data suggests the boom in spending in the first two months of the year has given way to a pause in the second two months. The chances are that over the remainder of this year spending growth will come in below average due to some further tightening of monetary policy, a recent sharp decline in consumer confidence, slowing net migration inflows, eventually falling dwelling construction (over 2006 it seems now), and falling non-pastoral exporter incomes due to the high exchange rate.
Each fortnight we run a survey of readers of our main publication, the Weekly Overview. The comments we received from retailers in our April 28 survey show that things have tightened up marginally in the sector – but not overwhelmingly so. The comments follow.
• Is it just because of the school holidays that retail goes quiet?
• Fuel retail/convenience. Strong sales after a small glitch after recent price rises.
• Books & Stationery retail. Small ticket and in particular magazine sales are affected overnight when petrol prices rise. Refilling a car price increases equate to between one to two magazine costs for the consumer.
• Retail remains very competitive, price deflation and cost inflation squeezing margins.
• Worse - Retail, the flow-on effect of housing, construction and the dollar.
• We are carpet retailers so quite confident as we are coming into our busy season which will last to the end of the year. I viewed the business confidence survey in the herald the other day with some scepticism as if you look at this time every year business confidence is at its lowest.
SPENDING BY REGION
The first graph below shows the unadjusted change in retail spending in the three months to April from the previous three month period ending in January 2005. NB. All regional data are adjusted in three ways. • Changes in BNZ card holder numbers month to month are removed as these can sometimes vary widely from one region to another.
• The effects of divergent population growth get stripped out by the above adjustment so population changes estimated by Statistics NZ are added back in with an estimate made for growth beyond June 2004 – the latest period for which SNZ estimates are available.
• Growth rates are scaled to match annual growth calculated in the above nationwide analysis.
The high performers have been Waikato, Gisborne, Manawatu/Wanganui, Canterbury and Otago, while spending restraint is evident in Auckland, Taranaki, and the West Coast.