Retail sales weaken in December, core retail spending down 1.2% from November, Stats NZ says

Retail sales showed weakness in December, dropping 1.1% from November on a seasonally adjusted basis, Statistics New Zealand said today.

December's decrease was predominantly driven by a 1.2%, or NZ$51 million, drop in core retail spending  - which excludes vehicle-related industries - over the month Stats NZ said.

Meanwhile, retail sales over the December quarter fell 0.4% from the September quarter. This comes as talk that New Zealand entered a double-dip recession in the second half of 2010 increases, after a 0.2% drop in GDP in the September quarter and weak data for the December quarter.

ASB economist Christina Leung said the quarterly fall was broadly in line with economist expectations, with the weakness in retail spending over the second half of 2010 likely to be the result of weak housing market activity over the period.

"In particular, the low level of house sales is likely to have driven the substantial -9.4% decline in sales volumes of furniture, floor coverings, houseware and textiles, as well as hardware, building and garden supplies. With fewer people moving houses, there is less need to purchase items in these categories," Leung said.

"Other areas of spending were also weak over Q4, with the 8.2% decline in sales of motor vehicle and parts almost reversing out the strength seen over the earlier part of 2010. The low levels of vehicle registrations over December and January calls into question the sustainability of the recovery in vehicle sales," she said.

'Reserve Bank to wait til Sept at earliest'

Today’s result pointed to weakness in retail spending over the second half 2010.

"Part of the weak result reflects the change in classification of the retail category used by StatsNZ. Nonetheless, the weakness in retail spending reflects the headwinds facing the household sector, including weak housing market activity and a slowing recovery in the labour market," Leung said.

"These factors are driving the cautiousness of households in regards to discretionary spending. January Electronic Cards Transactions showed a rebound from a weak December month, so retailing may have lifted in the early parts of 2011," she said.

"Today’s data add to the recent run of underwhelming data, and there remains little urgency for the Reserve Bank to lift the OCR. We expect the Reserve Bank will resume the tightening cycle in September at the earliest, and for the initial phase to be gradual."

Goff says it's National's fault

Meanwhile, Labour Party leader Phil Goff blamed the poor result for the quarter on the rise in GST from 12.5% to 15% on October 1.

See Goff's comments in the video above.

See the release from Stats NZ below:

The seasonally adjusted volume of total retail sales fell 0.4 percent in the December 2010 quarter, Statistics New Zealand said today. The volume of core retailing sales (which excludes the two vehicle-related industries) was flat, up less than 0.1 percent.

“This quarter’s fall in the total retail sales volume follows a similar-sized fall in the September 2010 quarter," business statistics manager Louise Holmes-Oliver said. "Conversely, core retailing has recorded increased sales volumes for the seventh consecutive quarter.”

The value of total retail sales was flat in the December 2010 quarter, down just 0.1 percent ($12 million).

Vehicle-related industries recorded the largest movements in both sales volumes and values in the December 2010 quarter. Fuel retailing had the largest sales volume rise (up 6.4 percent), while the sales value increased 10.4 percent, due to price increases. Largely offsetting these increases was an 8.2 percent fall in the motor vehicles and parts retailing sales volume, while the sales value also decreased 8.2 percent.

The core retailing sales volume and value were both flat in the December 2010 quarter, up less than 0.1 percent and down 0.1 percent respectively. Supermarket and grocery stores had the largest sales movements within the core industries, with the volume up 1.9 percent and the value up 2.4 percent.

In the December 2010 month, the seasonally adjusted total retail sales value decreased 1.1 percent ($60 million), following a 1.2 percent increase in November. December's decrease was predominantly driven by core retailing, which fell 1.2 percent ($51 million).

This release is the first quarter under the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06). From this quarter's release, volumes are expressed in September 2010 quarter prices.

Statistics NZ is changing the current monthly retail trade survey to a quarterly survey of retail sales and stocks. This is the last release of monthly retail trade data.

(Updates with Goff video, ASB comment)