NZ impressive retail spending continues to power on - Westpac
|Analysts at Westpac noted that NZ's retail spending continued to power ahead in the June quarter, with a strong 2.0% rise in sales volumes.
Key Quotes:
"Over the year to June, spending volumes are up a solid 5.4%.
Boosting spending levels in the June quarter were some high profile sporting events - the World Masters Games and the Lions rugby tour. These events, and the associated strength in tourism inflows, saw strong spending in the hospitality sector. That includes large gains in areas like food services and accommodation.
But strength in spending isn’t just a tourism story. The June quarter saw widespread gains across retail categories, including solid increases in areas like building supplies and electronics (with the latter likely supported by softness in import prices).
Looking at spending by region, the past year saw spending rise by 2% in Auckland, 1.8% Wellington, and 1% in Canterbury. There were also solid gains in areas outside of the main urban centres. However, there has been some softness in the Waikato, where spending levels were essentially flat over the past year.
The strong growth in retail spending through the first half of the year has been a very welcome development. However, we have some doubts this strength will be sustained over the remainder of this year. One of the big drivers of spending in recent years has been low interest rates and the related strength in house prices. This has been a particularly large driver of spending on durable household items like furniture. But in recent months, interest rates have risen and house price growth has pulled back. We expect that this will result in more moderate household spending growth over the coming months. This will offset some of the boost to spending from continued strong population growth and strong tourist inflows.
Overall retail prices fell 0.4% over the quarter, leaving them up 1.2% over the past year. Much of the increase in prices over the past year has been due to food and fuel costs. Looking at prices for other goods, things continue to look subdued."
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