Higher retail sales than expected

Increased motor vehicle sales have driven the retail sector to a stronger-than-expected level. Photo by ODT.
Increased motor vehicle sales have driven the retail sector to a stronger-than-expected level. Photo by ODT.
Retail sales for the quarter to June were stronger than anticipated, but not enough to force the Reserve Bank to bring forward interest rate hikes, otherwise expected early next year.

Retail sales rose more than expected, as vehicle sales increased at the fastest pace in two years.

''The motor vehicle and parts retailing industry has driven this quarter's increase in both sales volumes and values, recording their largest increases in two years,'' Statistics New Zealand business indicators manager Neil Kelly said.

Eleven of the 15 industries had higher sales volumes for the quarter.

Actual sales were up 3.8% in value from the corresponding quarter a year ago, better than the 3.4% estimate in a Reuters survey of analysts' expectations.

Westpac senior economist Felix Delbruck said the retail trade survey was consistent with other recent evidence the domestic economy regained momentum by mid-year, but continued to run at a slightly lower boil than seen in late 2013.

''Along with signs that the housing market is picking up again, that will keep the Reserve Bank focused on its medium-term hiking plans,'' Mr Delbruck said.

However, it was unlikely to bump the Reserve Bank off its current pause of interest rate hikes, particularly given the drop in dairy prices which had occurred since the June quarter.

''We continue to expect the Reserve Bank to keep the official cash rate on hold until January next year,'' he said.

ASB economist Nathan Penny said households were continuing to report high levels of confidence, in particular reflected in the 2.8% lift in food and beverage sales.

''This is the second consecutive strong quarter for this category and indicates households are willing to spend on discretionary items like eating out,'' Mr Penny said.

BNZ head of research Stephen Toplis said the strength in retail spending ''has some way to run''.

''We expect annual growth in retail sales to remain in excess of 3% right through until the end of 2015,'' he said.

Numerous reasons indicated this, in particular, employment growth continued at a strong pace, which meant falling unemployment, so consumer confidence tended to remain supported, which in turn promoted retail spending.

An overarching factor was that population growth, led by net migration, was ''running hot''.

Overlooked by many was yesterday's revelation by Statistics New Zealand that the country's population grew by 67,800 people in the year to June, with net migration having contributed 56% of that increase, Mr Penny said.

simon.hartley@odt.co.nz

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