While recent data has shown some early signs of improvement, last week’s retail sales figures for Q1 showed that the New Zealand economy is coming from an even worse starting point than expected. Meanwhile, an RBNZ report highlighted some of the headwinds to a recovery.
Consumer caution compounded retailers’ misery in the first quarter of 2009. The volume of sales plunged a record 2.9%, double the previous record decline set during the 1997 Asian crisis – and unlike then, the latest quarterly decline was part of a long, sustained slide in retail spending. Sales volumes have now fallen for six quarters running, and are 6.8% below their June 2007 peak.
Rising unemployment and concerns around how the world recession will impact at home have left consumers too rattled to splash out on upgrades to durables items. Car sales fell a massive 11.4% in the quarter, and are now 32% down from the 2007 heyday. Along with the plunge in car sales, furniture and floor coverings (-3.5%), hardware (-4.5%), and appliances (-5.9%) all suffered. The only sector to post a convincing increase in sales was supermarkets, possibly as people cut back on takeaways and eating out.
The trend remained weak throughout the quarter, with nominal sales down a further 0.4% in the month of March. If there was any glimmer of good news in these figures, it was that lower spending on fuel was wholly responsible for the decline, leaving a little more cash in people’s pockets to be used elsewhere (ex auto sales were up 0.5%). Last week’s electronic transactions figures for April also showed a 0.3% increase in retail transactions. But that reads more like a lacklustre response to the tax cuts that came into effect on 1 April than a portent of sustained retailing recovery. It seems increasingly likely that most of the cash from tax cuts and lower interest rates will be saved rather than spent.
