New Zealand's June Retail Sales Increase 0.9% on Fuel

By Tracy Withers

Aug. 15 (Bloomberg) -- New Zealand's retail sales unexpectedly increased in June as consumers paid more for fuel and food.

Sales rose 0.9 percent from May, when they declined 1.1 percent, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. The median estimate of 12 economists surveyed by Bloomberg News was for no change.

Spending, adjusted to remove inflation, dropped over the second quarter, today's report also showed, marking the first time in a decade that sales have fallen for consecutive quarters. The Treasury Department forecasts the economy is in a recession, and the central bank lowered interest rates for the first time in five years in July and said further cuts are likely.

``Anything to do with the household sector remains down in the dumps at the moment,'' Craig Ebert, senior markets economist at Bank of New Zealand Ltd. in Wellington, said before the report was released. ``The Reserve Bank is on a clear and sustained easing course.''

New Zealand's dollar traded at 70.05 U.S. cents at 11:10 a.m. in Wellington trading from 69.76 cents before the report was released. The currency has slumped almost 10 percent against the U.S. dollar this year on signs of a slowdown in the economy.

Retail sales excluding inflation, a measure of volumes, fell a record 1.5 percent in the second quarter following a 1.2 percent drop in the three months to March. Economists expected a 1.8 percent decline.

It was the first time sales volumes fell in two successive quarters since 1998, the statistics agency said. The series began in 1995.

Mortgages, Fuel

Curbing consumer spending, home-loan costs have jumped while the price of gasoline has accelerated, leaving less money for discretionary goods.

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.

Slowing consumer spending and a slump in the housing market probably pushed the $105 billion economy into a recession in the first half, the Treasury Department said Aug. 4.

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.

Rate Cuts

Reserve Bank Governor Alan Bollard last month cut the official cash rate a quarter-point from a record 8.25 percent, where he had kept it since July 2007. He said spending is likely to remain weak amid a slumping housing market and high gasoline prices.

Consumer confidence dropped 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

Sales rose at 13 of the 24 store categories in June from the previous month, today's report showed.

Supermarket and grocery sales, which make up a fifth of all retailing, gained 0.6 percent. Department store sales fell as did purchases at furniture and clothing stores. Sales at vehicle dealers rose 5.2 percent from May, when they declined 15 percent.

Core retail sales, excluding spending on gasoline and at auto dealers and workshops, were unchanged. Economists expected a 0.8 percent decline.

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