New Zealand consumers have become cautious. Carefree spending seems to be a thing of the past. The official retail sales data for the last quarter of 2008 confirms what we already suspected – consumers have largely put away their purses and wallets. Christmas was not a good one for retailers.
Retail sales in Q4 provide more evidence that consumers have been saving their extra cash from tax cuts, lower interest rates and lower fuel prices. The value of sales in Q4 2008 was 1.5% below year ago levels, with the volume of sales down 3.7% over the same period. For many, the hit to household balance sheets over the past year via lower house prices and lower share prices has been a key reason behind a general reluctance to spend. Falling house prices has brought a major swing towards households injecting equity (on average) into houses in 2008, compared to the hefty withdraws over the preceding five years.
Durable items – especially cars – continue to be most affected by the consumer retrenchment. Car sale volumes declined 4.9% in Q4 (seasonally adjusted) to be down 17.4% on a year ago. Furniture and floorcoverings and hardware sales were also down. Appliances volumes bucked the trend of falling durable sales rising 4.6% in the quarter thanks to aggressive discounting. Appliance prices fell 1.9% in Q4 to be 6.7% lower than a year ago.
In the month of December, petrol prices fell around 9%. This was reflected in an 8.4% decline in the value of sales at petrol stations during the month. Importantly though, it appears households did not spend the fuel savings elsewhere. Core sales (that is total sales minus auto related sectors) fell 0.6% during December.
