New Zealand Retail Sales Gain 0.8%, Spurring Recovery

By Tracy Withers

July 13 (Bloomberg) -- New Zealand’s retail sales rose for the third time in four months in May, adding to signs that record-low interest rates and income-tax cuts may help the economy emerge from a recession later this year.

Sales gained 0.8 percent from April when they increased 0.5 percent, seasonally adjusted, Statistics New Zealand said in Wellington today. Core retail sales, which exclude car yards, fuel outlets and workshops, surged 1.6 percent, the biggest monthly gain since February 2007.

Higher retail and property sales add to evidence the economy may emerge from the worst recession in three decades by the end of this year. Reserve Bank Governor Alan Bollard kept the benchmark interest rate unchanged last month for the first time in a year, saying household spending may rebound.

“There were some tentative sign of housing-related spending picking up, although this is from a low base and the pickup in housing demand has been relatively modest to date,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. The report “suggests that underlying consumer demand remains reasonably subdued,” she said.

The increase in sales was four times the 0.2 percent median estimate in a Bloomberg News survey of 10 economists. New Zealand’s dollar bought 62.85 U.S. cents at 11:20 a.m. in Wellington from 62.74 cents just before the report was released.

Interest Rates

Bollard has cut the benchmark interest rate by 5.75 points to a record-low 2.5 percent since July last year. Finance Minister Bill English reduced income taxes on April 1 to help kick-start an economy that shrank for a fifth straight quarter in the three months ended March 31.

The economy may start growing in the fourth quarter of this year, Bollard said on June 11.

Buoying spending, annual immigration growth accelerated to the highest in more than two years in May. Consumers’ pessimism about their future wealth has fallen to the lowest level since February last year, according to a Roy Morgan Research poll taken in the two weeks ended July 5.

House prices were unchanged in June from a year earlier -- the first time in 15 months values hadn’t declined, the Real Estate Institute said last week. House sales rose 40 percent from a year earlier.

Retail sales increased in 14 of the 24 store categories measured in today’s report, led by a 2.2 percent gain in supermarket and grocery sales, which make up one-fifth of all retailing.

Monthly Sales

The monthly sales series isn’t adjusted to exclude price movements and sales. Grocery food prices rose 1 percent in May, according to government figures.

Clothing store sales surged 13 percent as plummeting temperatures and above-average rainfall boosted sales of winter clothes, the statistics bureau said. Appliance sales also gained.

“The cold snap sent shoppers indoors to the mall and boosted clothing sales,” said ASB’s Turner.

Pumpkin Patch Ltd., the nation’s second-largest retailer by market capitalization, last month said trading at its children’s clothing stores, was “reasonably robust.”

Vehicle dealer sales fell for the first time in three months, dropping 1.9 percent. Purchases from fuel outlets declined 2.7 percent.

The core retail trend series, which excludes irregular movements as well as seasonality, rose 0.2 percent from April.

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