Our take on the latest Retail trade survey (Fri 23 Feb 2024)
Core retail sales volumes down 1.7% from Sep 2023 quarter (seas. adj)
Quarterly core sales values fall for first time since mid-2021
Accommodation sales volumes ease 4.8% from Sep 2023 quarter (seas. adj)
The key numbers...
- Core retail sales volumes, which exclude motor vehicle and fuel retailing, eased 1.7% from the September 2023 quarter (seasonally adjusted). This result represents a reversal of the September quarter’s 0.4% increase, and resumes a downward trend in retail volumes that began in mid-2022.
- Supermarket sales volumes, which increased an estimated 1.1% in the September quarter, declined 0.5% in the December quarter. Similarly, the 4.0% September quarter increase in clothing retailing was followed by a 4.0% decline. All figures are seasonally adjusted.
- Accommodation sales volumes fell 4.8% from the September quarter (seasonally adjusted), the first negative quarter-on-quarter result for this sector since late 2022.
- The value of core sales eased for the first time since mid-2021, falling 1.5% from the September quarter.
- Core stock volumes declined for a fourth consecutive quarter, and are now sitting 4.7% below their December 2022 peak. However, stock levels remain considerably above pre-pandemic levels.
Retail values decline for first time since mid-2021
Retail sales, core measure, seasonally adjusted, $b
...and our reaction
- Retail activity resumed its downward trend in December, suggesting that September’s surprisingly buoyant result is likely to be a one-off. The fall in core retail values, despite consumer inflation remaining well outside of the Reserve Bank’s 1-3%pa target band, illustrates the significant spending cuts Kiwi households are making in the face of cost-of-living challenges.
- An emerging decline in nominal retail sales at the same time as record-high population growth further underscores the constraints on household spending, as we would expect a larger population to contribute to higher overall sales values.
- The Bank’s recent comments have taken a more hawkish tone, looking to push out expectations around the timeline of interest rate cuts. This re-evaluation will likely keep mortgage rates at their current level for the first half of 2024, maintaining pressure on household budgets.
- The fall in accommodation sales volumes comes at the same time as New Zealand’s tourism recovery runs out of steam, with foreign tourist arrivals plateauing at around 80% of pre-pandemic levels over the past few months. Additionally, cost of living challenges have caused a pull-back in domestic tourism, further lowering demand for related sectors.
- Stock volumes continue to decline, as less stock on-hand is needed with fewer supply chain issues and softer demand. However, the decline in stock volumes from their 2022 peak has been persistently sluggish, showing that businesses are still struggling to move existing product.
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