Buying spree before GST rise

Retail figures released yesterday showed New Zealanders did go on a buying spree before GST increased to 15% on October 1.

Retail data out to date, mainly electronic transactions figures, had previously indicated New Zealanders were holding on to their money during the month of September while they focused on lowering personal debt.

However, Statistics New Zealand figures showed households bringing forward big-ticket purchases before the GST increase.

In particular, sales of furniture and floor coverings increased a whopping 30.1%, compared with August figures, while sales of appliances rose 14.4%.

ASB economist Christina Leung said the increased September sales followed weak sales in those areas in recent months.

"We expect some payback in the form of declines in sales in the subsequent months. Indeed, the latest consumer confidence survey results show a large drop in the number of households considering now as a good time to purchase a major household item following the GST increase."

Spending in the other areas indicated a continuation of a gradual recovery in retail spending, she said.

However, spending in bars and clubs, cafes and restaurants and accommodation remained subdued, in line with weak tourist spending in recent months.

In the three months ended September, the same factors that drove the strong increase in September monthly sales drove retail sales volumes higher over the quarter. Sales of furniture and floor coverings increased 5.7%, while appliance sales rose 4.3%. At the same time, spending on alcohol and eating out continued to trend lower.

Ms Leung said some discounting looked to have played a part in the stronger-than-expected increase in retail sales volumes. The price of appliances continued to fall, down 2% in the September quarter, while the price of furniture and floor coverings was broadly flat.

Clothing prices fell 1.1%, while prices in department stores dropped 0.7% in the period.

"The New Zealand dollar's appreciation in recent months means there is potential for more discounting of imported consumption goods on the part of retailers over the coming year."

Beyond the volatility in furniture and appliance sales, there was a continuation of a gradual recovery in retail spending, she said.

Households appeared more willing to spend on discretionary items and sales were expected to trend higher in the coming year as the improvement in the labour market underpinned consumer confidence, Ms Leung said.

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