New Zealand retail spending slows again, pointing to recession
NEW Zealand retail spending fell for a second straight quarter as high interest rates dented consumer sentiment, adding to signs the economy was in recession in the middle of the year.
Retail sales volumes fell 0.1 per cent in the three months to September after dropping 1.2 per cent in the second quarter, Statistics New Zealand said on Monday (Nov 25) in Wellington. Economists had expected a 0.5 per cent decline.
“While firmer than expected, today’s figures were broadly in line with the continued softness in economic growth that we are forecasting in the September quarter,” said Satish Ranchhod, senior economist at Westpac in Auckland.
The Reserve Bank of New Zealand began cutting interest rates in August but that has so far failed to spark a bounce in consumer spending in part because only a small proportion of home lending is on variable rates. Policymakers picked up the pace with a 50 basis-point cut in October, taking the Official Cash Rate to 4.75 per cent, and most economists expect another 50-point move this week.
The economy contracted 0.2 per cent in the second quarter. Local economists predict that gross domestic product dropped further in the three months to September, which would mean a second recession in less than two years.
Spending was subdued even as incomes were boosted by modest income tax cuts which took effect Jul 31.
Weak household spending follows data showing that the manufacturing and services industries have been in prolonged downturns, while employment dropped in the three months to September. Third-quarter GDP data are published on Dec 19.
Consumers spent less at the nation’s grocery and department stores, while purchases from hardware and building supplies outlets were little changed, today’s report showed. Still, car yard sales and electrical goods spending increased. BLOOMBERG
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