Retail sales values up 0.5% in September qtr, volumes flat (Update 2)

Retail spending seems to have bottomed out although consumer caution still remains, ASB Chief Economist Nick Tuffley said following September quarter retail sales figures that showed the value of sales rose 0.5% from June, while sales volumes remained flat over the quarter. (Update 2 includes ASB economist comments.) The figures suggest that prices, in general, rose during the quarter, Statistics New Zealand said when it released the figures. The core retail industries (which exclude motor vehicle related sales) saw sales value growth of 0.6% over the quarter, led by a 1.1% rise in supermarket and grocery store retailing and a 5.1% increase in appliance retailing from June. Annual (unadjusted) figures suggest core retail sales, expressed in September 1995 prices, are back to the same levels seen in the September quarter last year. Monthly figures show the value of retail sales rose 0.2% in the month of September from August, with the slight growth coming from motor vehicle retailing. Seasonally adjusted core retail sales during the month were flat from August. Unadjusted figures show total retail sales based on September 1995 prices were down 2.9% in the September quarter from the same period last year. However, this was better than the 4% annual decrease in the June quarter and the 6.8% decrease in the March quarter. It was the smallest annual fall since the June quarter 2008 (down 2.4%). Core retail sales were basically flat year-on-year (down 0.1% from September 2008). This was better than the 0.9% annual fall in June and the 2.9% annual fall in March. The last quarter for which there was annual growth in core retail sales was the March 2008 quarter (up 0.9%). Here are Stats NZ's comments on the figures:

The value of seasonally adjusted total retail sales increased 0.5 percent ($82 million) in the September 2009 quarter, Statistics New Zealand said today. This is the second quarter with increased sales values, following four quarters of decreases. Although sales values were up, volumes were flat (up just 0.1 percent), suggesting that prices, in general, rose this quarter. The picture for retailing for the September 2009 quarter is mixed, with just over half the industries recording sales increases. The biggest increase in sales value was in supermarket and grocery stores (up 1.1 percent or $41 million), followed by appliance retailing (up 5.1 percent or $32 million). The biggest decreases in sales value were in automotive fuel retailing (down 2.5 percent or $38 million), and department stores (down 3.2 percent or $30 million). A sizeable increase in appliance retailing volumes (up 6.5 percent) offset decreases in motor vehicle retailing, department stores, and the other retailing industry, to give a flat result overall. Both the value and the volume of seasonally adjusted core retail sales, which excludes the four vehicle-related industries, increased in the latest quarter. The value was up 0.6 percent ($69 million) and the volume up 0.5 percent. The trend in the value of total retail sales has risen 1.1 percent since the March 2009 quarter, after falling 2.3 percent in the previous four quarters. The trend in the volume of total retail sales appears to have flattened "“ after a 6.6 percent decline over the previous eight quarters "“ up just 0.2 percent in the latest quarter. In the September 2009 month, compared with August 2009, seasonally adjusted total retail sales were flat, increasing just 0.2 percent. Thirteen of the 20 core retail industries moved, up or down, by less than $3 million.

Overall retail volumes were a touch ahead of expectations, but not significantly so. Qualitatively the message is as expected: the recovery in consumer spending is cautious to date. Ex-auto volumes were on the strong side of our expectations: the overall dollar spend was close to expectations but inflation took up less of a chunk than anticipated. In contrast to the strong CPI, there is more evidence of retail discounting keeping a lid on prices. Although overall spending volumes were modest, there are some signs of life within the big-ticket or housing-related categories. Furniture/floorcoverings registered their first volume increase in 2 years and hardware volumes have risen for 2 consecutive quarters. Appliance retail volumes rose 6.5%, continuing a strong run "“ the only quarterly in which volumes fell during the recession was Q1 this year. In contrast, car sales were down 2% after a slight increase in Q2. However, the run of sharp falls appears to have ended, and vehicle registrations point to modest recovery in sales volumes ahead. The Q3 retail sales figures do confirm that spending has bottomed out. But consumer caution is still in evidence. Overall sales volumes growth is very modest, and the lift in big-ticket spending appears more related to stronger housing market turnover than consumers relaxing their grip on their wallets. Based on the retail figures Private Consumption volumes will contribute modestly to Q3 GDP growth: our current GDP forecast is a modest 0.3% qoq. As with the wider economy, consumer spending will be slow in gaining momentum. The RBNZ will remain comfortable with its view of keeping the OCR on hold until the second half of 2010. Household spending is tracking consistent with households spending more within their means. It is the housing market that we expect to increasingly weigh on the RBNZ's outlook. We continue to expect the RBNZ to start lifting interest rates from April.