New Zealand Quarterly Retail Sales Decline By Most in 13 Years

By Tracy Withers

Aug. 15 (Bloomberg) -- New Zealand's retail sales fell by the most in at least 13 years in the second quarter, when adjusted for inflation, as spiraling food and fuel prices left consumers with less to spend on dining out and clothes.

Sales slumped 1.5 percent from the first quarter, when they dropped 1.2 percent, Statistics New Zealand said in Wellington today. That was the first back-to-back quarterly decline in a decade. The median estimate of 12 economists surveyed by Bloomberg News was for a 1.8 percent decrease.

The biggest sales drop since the quarterly series began in 1995 adds to signs New Zealand's $105 billion economy sank into a recession in the first half of the year. Reserve Bank Governor Alan Bollard lowered interest rates for the first time in five years in July and said further cuts are likely as spending wanes.

``Consumers' wallets are well and truly shut,'' said Khoon Goh, a senior economist at ANZ National Bank Ltd. in Wellington. ``We're in the midst of a retail recession and there's a strong likelihood of a negative print for second-quarter GDP.''

New Zealand's dollar traded at 69.98 U.S. cents at 12:02 p.m. in Wellington from 69.76 cents before the report was released. The currency has dropped almost 10 percent against the U.S. dollar this year.

Faltering consumer spending and a slump in the housing market probably pushed the economy into a recession in the first half of 2008, the Treasury Department forecast on Aug. 4.

Economy Contracts

Gross domestic product contracted 0.3 percent in the first quarter. ANZ National's Goh estimates the economy shrank 0.5 percent in the three months ended June 30. Second-quarter GDP figures are due in September.

Bollard last month cut New Zealand's benchmark interest rate by a quarterpoint from a record 8.25 percent, where he had kept it since July 2007. He said spending is likely to remain weak amid a deterioration in the housing market and high gasoline prices.

``The Reserve Bank has a lot more work to do and will continue to cut the official cash rate in the coming months,'' said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. She forecasts another rate reduction in September.

Briscoe Group Ltd., which sells home-ware and sporting goods, said Aug. 4 that sales at its Rebel Sports stores fell 9.2 percent in the three months ended July 27.

``Trading conditions continued to be challenging during the second quarter,'' said Managing Director Rod Duke. Profit margins were squeezed by a high level of discounting, he said.

Fuel, Mortgage Costs

The interest rate on a two-year fixed mortgage was 8.69 percent in June from 7.98 percent a year earlier, according to central bank figures. Gasoline prices jumped 35 percent in the same period, according to government figures.

Consumer confidence slumped to a 17-year low in the second quarter, according to an index calculated by Westpac Banking Corp. House sales plunged 42 percent to a 16-year low in June, the Real Estate Institute said July 11.

In the quarter, supermarket and grocery-store sales fell 3.7 percent and vehicle sales dropped 4.8 percent. Core sales excluding vehicles dealers, fuel outlets and workshops declined 0.7 percent in the quarter.

In June, sales rose 0.9 percent led by spending at vehicle dealers and on fuel. The monthly series doesn't adjust for higher prices. Economists surveyed by Bloomberg expected no change.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.