23 May 2024

Retail outlook remains weak despite first quarterly rise in two years

6:40 pm on 23 May 2024
Shoppers looking at a rail of clothes in a mall (Stock photo).

Gains for groceries, hospitality, clothing and recreational goods offset reduced spending on DIY products, furniture, and department store sales. (file image) Photo: 123RF

Retail sales have had their first quarterly rise in two years, but consumers continue to avoid buying big ticket items and the outlook for the sector remains weak.

Stats NZ data showed retail sales volumes, which discount the impact of inflation, rose 0.5 percent in the three months ended March, but were 2.4 percent lower than the year before.

But the shopping preferences were a mixed bag, with gains for groceries, hospitality, clothing and recreational goods, offsetting reduced spending on DIY products, furniture, and department store sales.

ASB senior economist Kim Mundy wondered if the rise was a "dead cat bounce" after the outsized 1.8 percent fall in the December quarter.

"Despite the quarterly rise in retail volumes in Q1, retail spending remains broadly weak. The data continues to highlight that RBNZ policy is slowing household demand."

The RBNZ would take some comfort from the retail inflation indicators, called deflators, were lower, she said.

Nine of the 15 shopping types measured had higher sales, and 13 of 16 regions had higher sales led by Canterbury and Otago.

"[This] could have been influenced by more international visitors, an early Easter holiday, and special events such as SailGP and Warbirds Over Wanaka," Stats NZ manager Melissa McKenzie said.

Westpac senior economist Satish Ranchhod said the overall weakness in the retail sector was apparent in that sales had fallen over the past year, while the population had risen about 2.7 percent.

"Overall, we continue to expect softness in spending over the coming months. That's consistent with recent retail card spending reports and feedback from retailers - many of whom have reported missing sales targets in recent months."

The retail numbers would add marginally to economic growth calculations for the quarter, Ranchhod said.

Leading retailers The Warehouse Group and Michael Hill International have recently reported sharp falls in sales and highlighted the "uncertain" retail scene, while ANZ bank's most recent consumer confidence survey showed sentiment, apart from the height of the Covid outbreak, at its lowest in more than 15 years.

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