New Zealand Quarterly Retail Sales Fall in Recession

By Tracy Withers

Nov. 13 (Bloomberg) -- New Zealand's retail sales fell for a third straight quarter, adding to signs that spiraling food prices and soaring credit costs are prolonging a recession.

Sales, adjusted for inflation, dropped 0.9 percent from the second quarter when they declined 1.4 percent, Statistics New Zealand said in Wellington today. The decline was less than the 1.2 percent median estimate of nine economists surveyed by Bloomberg News. Sales rose 0.1 percent in September from August.

Slowing sales at retailers including Warehouse Group Ltd., the nation's biggest discount-store chain, may prompt Reserve Bank Governor Alan Bollard to cut borrowing costs again next month to spur spending. Bollard has reduced the benchmark rate by 1.75 percentage points to 6.5 percent since July after the $130 billion economy contracted in the first half of the year.

``Clearly things are turning down,'' said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. ``We're likely to see some pretty weak sales numbers in coming months and that will add to the case for the Reserve Bank interest-rate cuts.''

New Zealand's dollar fell to 55.69 U.S. cents at 11:45 a.m. in Wellington from 55.98 cents immediately before the report.

New Zealand is in its first recession since 1998. Declining domestic demand and global market turbulence meant the economy probably also shrank in the third quarters, according to central bank and Treasury forecasts.

Spending `Subdued'

The central bank will cut the official cash rate by 1 percentage point to 5.5 percent on Dec. 4, according to the median forecast of 13 economists surveyed by Bloomberg News.

Food prices rose 3.9 percent in the three months through September while home-loan interest rates, which peaked in July, are still higher than a year ago.

Warehouse Group last week said sales in the quarter ended Oct. 26 fell 2.1 percent from a year earlier and it expects spending will remain subdued for some time.

``There has been a slowdown in consumption and volumes on some categories, particularly appliances and larger-ticket items such as outdoor furniture and other discretionary products,'' Chief Executive Officer Ian Morrice said in a statement.

Hallenstein Glasson Holdings Ltd. said sales at its New Zealand clothing stores slumped 8 percent in the 13 weeks ended Oct. 31. The Auckland-based company said first-half profit will be ``considerably below'' the year-earlier period.

Housing Market

Briscoe Group Ltd., which sells home-ware and sporting goods, said on Nov. 4 that sales in the nine months ended Oct. 26 were 6.5 percent less than a year earlier

Spending has slumped 3.5 percent since the start of the year as the housing market plunges, making consumers feel less wealthy. The decline is more than twice the 1.6 percent decline in the nine months ended March 31, 2007 -- the last time spending contracted for three straight quarters.

House sales dropped to a 26-year low in August, according to Real Estate Institute figures. House prices have been falling since March.

The economic slowdown left consumers more pessimistic, with 40 percent of those surveyed in October by Colmar Brunton saying the economy will worsen.

Sixteen of 24 store categories recorded lower sales in the third quarter, led by vehicle dealers, supermarkets, fuel outlets and furniture stores.

Auto Sales

Vehicle dealer sales fell 3.1 percent, the fourth straight decline. The trend in car sales is dropping at the fastest pace since records began in 1995, the statistics agency said.

Supermarket and grocery-store sales fell 1.9 percent. Fuel outlet sales declined 2 percent.

Core sales, which exclude vehicles dealers, fuel outlets and workshops, dipped 0.2 percent in the quarter after falling 0.6 percent in the three months to June.

Department store and appliance retailers posted higher sales as lower prices buoyed sales.

In September, sales rose 0.1 percent, led by spending at car dealers and grocery stores. The monthly series doesn't adjust for higher prices. Economists surveyed by Bloomberg expected a 0.4 percent increase. Core sales fell 0.5 percent from August.

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