Global Markets Research 1

Key points

Total retail sales are estimated to have risen by 0.7% mom in May. Sales were 7.1% higher than a year earlier.

Excluding motor vehicles sales and servicing store-types, retail sales fell by 0.4%.

Commentary With vehicle sales relatively weak in May, the 5% rise in average petrol prices in May has been behind the spending increase in the automotive group.

With average pump prices having risen buy another 6% in June, a similar effect may occur this month.

Following the 0.4% decline in non-automotive spending in May, that is expected to lead to a further cutback on discretionary spending, which is the key issue the RBNZ will focus on in its analysis of current retail sector trends.

While petrol price increases are causing a rise in the inflation rate, the RBNZ has signalled that it will `look through' such temporary effects.

The weakness in non- automotive retail demand by the household sector has occurred despite the fact that retail sales have been receiving a significant boost from double-digit increases in tourist arrivals.

Our estimate for growth in real household consumption during Q2 is zero.

Ulf Schoefisch, Chief Economist (64) 9 351 1375