Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Retail Sales - August (Final)

Data Flash (New Zealand)
Retail Sales - August (Final)

Key points Total retail sales rose 1.1% mom in August, 0.4 percentage points weaker than the provisional estimate of 1.5% mom released on 21 August. Minor revisions were made to growth rates during earlier months.

A 2.7% mom increase in motor vehicle services made the largest positive contribution to growth during the month. This largely reflects higher petrol prices - we estimate that the average price of petrol rose by approximately 3.6% mom in August. A 2.0% mom increase in motor vehicle retailing made the second largest positive contribution, consistent with a bounce-back in motor vehicle registrations during the month. However, Statistics NZ note that the average landed price of motor vehicles over the 3 months to August increased by 7.8% compared with a year earlier. To date the CPI has shown little increase in new car prices at the retail level (and falling used car prices). However, we expect higher car prices to be recorded in the Q3 CPI.

Excluding motor vehicle sales and services, retail sales rose by 0.6% mom in July - slightly weaker than the 0.7% mom growth estimated in the provisional release. Increased sales in the department store and clothing and softgoods storetypes accounted for the rise. Sales in the hotel, accommodation and liquor storetype fell 2.9%. Monthly data at the storetype level is very volatile. Despite soft activity in the housing market, the furniture and floorcovering storetypes recorded 4% mom growth in August while appliance sales remained at high levels. This outcome is surprising given the very soft construction and house sales data in recent months. As discussed below, this may partly reflect the passing through of price rises as a result of currency weakness and the bring- forward of spending in anticipation of further price rises.

Total sales in the South Island grew 2.6% mom compared with growth of just 0.4% mom in the North Island.

Commentary Price increases are likely to be a significant factor underpinning growth in nominal sales. Given our forecast of a 1.3% qoq increase in the CPI in Q3, we estimate that the retail trade deflator will rise by close to 2% qoq. Assuming a flat result for retail sales in the month of September, overall nominal sales in Q3 would rise by around 2.5% qoq, pointing to around 0.5% growth in retail volumes.

Taking today's result at face value, the apparent continuation of volume growth despite low levels of consumer confidence and pressures on real disposable incomes is likely to reflect a number of factors.

Net tourist flows continue to remain very strong. Arrivals in the three months to August were up 13.7% yoy, whereas departures were up just 2.5% yoy over the same period. This effect is reinforced by increasing levels of spending per visitor (aided by the weak exchange rate).

With `beat the price rise' advertisements increasingly commonplace, we think that purchases of large durable items in particular are being pulled forward to some extent as households anticipate widely announced increases in prices as a result of the weakening exchange rate. As this process comes to an end, a renewed weakening in retail sales may occur. Data on September new car registrations released today show a 5% mom decline to a level 15% lower than a year earlier.

It is conceivable that price rises are even more widespread than our inflation forecasts for Q3 imply, so that underlying volumes are weaker than our figuring would suggest. The price/volume split for September quarter sales will be released with the September month retail sales on 7 November.

Taking today's data at face value, the risk that household consumption makes a significant negative contribution to GDP growth in Q3 appears relatively low. Given our expectation of a strong contribution to growth from net exports - dairy production has already made a very positive start to the season - we are comfortable with our forecast of a return to moderate levels of GDP growth in Q3 (our current estimate is for growth of +0.5% qoq), rather than a second consecutive quarter of negative growth as some commentators have suggested. A recovery in growth, combined with external pressures on inflation from ongoing weakness in the exchange rate, will likely force the RBNZ to hike rates further. However, as set out in a separate note today, given the RBNZ's obvious reluctance to change policy settings until the medium term outlook becomes somewhat clearer, the balance of risks has now shifted towards no change in the OCR on 6 December. Our view reflects the fact that, more likely than not, data scheduled for release over the next two months will be insufficient for the Bank to resolve its uncertainty about the medium-term inflation outlook (the Bank will begin to revise its economic and inflation forecasts within the next couple of weeks). Given that the medium term outlook for inflation is likely to remain unclear, and that lack of clarity explains the Bank's reluctance to move at recent meetings, a decision to the leave rates on hold on 6 December seems to be the most likely outcome.

Darren Gibbs, Senior Economist (64) 9 351 1376

This, along with an extensive range of other publications, is available on our web site

In order to read our research you will require the Adobe Acrobat Reader which can be obtained from their website for free.

For answers to your EMU questions, check Deutsche Bank's EMU web site or email our helpline

© Scoop Media

Business Headlines | Sci-Tech Headlines


Maritime NZ: NZ Joins Global Initiative Keeping Ports Open And Freight Moving

New Zealand has joined an international port authorities’ global initiative for safe and efficient movement of goods and shipping during the COVID-19 crisis. World-wide, 56 port authorities have agreed how they will work together facilitating maritime ... More>>


National: National Backs Businesses With $10k JobStart

National will provide a $10,000 cash payment to businesses that hire additional staff as part of our commitment to keeping New Zealanders in jobs, National Party Leader Todd Muller and Finance spokesperson Paul Goldsmith have announced. Our JobStart ... More>>


DIY Law: Government Exempts Some Home Improvements From Costly Consents

Homeowners, builders and DIYers will soon have an easier time making basic home improvements as the Government scraps the need for consents for low-risk building work such as sleep-outs, sheds and carports – allowing the construction sector ... More>>


Media Awards: The New Zealand Herald Named Newspaper Of The Year, Website Of The Year At Voyager Media Awards

The New Zealand Herald has been labelled a “powerhouse news operation” as it claims the two biggest prizes – Newspaper of the Year and Website of the Year – along with many individual awards at the 2020 Voyager Media Awards Website of the ... More>>


ASB Bank: ASB Takes The Lead Again With New Low Home Loan Interest Rate

ASB has moved again to support its customers, cutting a number of home loan rates, including the two-year special rate to a new low of 2.69% p.a. Craig Sims, ASB executive general manager Retail Banking says the reduced rate will be welcome news for many ... More>>


Nathan Hoturoa Gray: The Problems With Testing And Case Statistics For Covid-19

To begin to understand disease transmission in a country requires adequate testing of your population with properly vetted, accurate tests. As the world struggles to find what 'adequate percentage' of the population is necessary, (estimates predict ... More>>


RNZ: Fletcher Building To Lay Off 1000 Staff In New Zealand

The construction company will cut around 10 percent of its workforce as it struggles with the fallout from Covid-19. More>>


Can Pay, Won't Pay: Cashflow Moves Urged

Government Ministers are asking significant private enterprises to adopt prompt payment practices in line with the state sector, as a way to improve cashflow for small businesses. More>>


Gordon Campbell: On Why We Should Legally Protect The Right To Work From Home

For understandable reasons, the media messaging around Level Two has been all about “freedom” and “celebration”, but this is not necessarily going to be a universal experience. When it comes to workplace relations, Level Two is just as likely to ... More>>


Auckland Airport: Thousands Of Kiwis Travelling For Queen’s Birthday Weekend

Confidence in domestic travel is beginning to steadily ramp up, with thousands of Kiwis travelling within New Zealand for Queen’s Birthday.
Nearly 400 flights will be operating to and from Auckland Airport over the long weekend... More>>


Science Media Centre: Understanding 5G Concerns – Expert Q&A

Recent attacks on cell phone towers have brought concerns over the rollout of 5G technology into sharp relief.
While scientific research has consistently shown that the technology does not adversely affect human health, public concerns about its impact have spread around the world, fueled in part by growing misinformation online. The SMC asked experts to comment... More>>


Trade: Record Monthly Surplus As Imports Dive

Imports in April 2020 had their biggest fall since October 2009, resulting in a monthly trade surplus of $1.3 billion, Stats NZ said today. “This is the largest monthly trade surplus on record and the annual goods trade deficit is the lowest ... More>>


Media Blues: Stuff Chief Executive Buys Company For $1

Stuff chief executive Sinead Boucher has purchased Stuff from its Australian owners Nine Entertainment for $1.
The chief executive was returning the company to New Zealand ownership, with the sale is expected to be completed by 31 May.
"Our plan is to transition the ownership of Stuff to give staff a direct stake in the business as shareholders," Boucher said in a statement.... More>>


RNZ: Bar Reopening Night 'much, Much Quieter'

Pubs and bars are reporting a sluggish first day back after the lockdown, with the fear of going out, or perhaps the joy of staying home, thought to be a reason for the low numbers. More>>


Stats NZ: New Zealand’s Population Passes 5 Million

New Zealand's resident population provisionally reached 5 million in March 2020, Stats NZ said today. More>>

NIWA: Seven Weeks Of Clearing The Air Provides Huge Benefits: Scientist

Seven weeks of lockdown has provided evidence of how pollution can vanish overnight with benefits for the environment and individuals, says NIWA air quality scientist Dr Ian Longley. Dr Longley has been monitoring air quality in Auckland, Wellington ... More>>


Government: Milestone In Cash Flow Support To SMEs

A significant package of tax reforms will be pushed through all stages in Parliament today to throw a cash flow lifeline to small businesses. More>>