New Zealand Retail Sales Rise 1.1% as Recession Ends

By Tracy Withers

Oct. 13 (Bloomberg) -- New Zealand’s retail sales rose in August at more than twice the pace expected by economists, adding to signs the economy’s recovery from recession is gathering pace in the second half of this year.

Sales increased 1.1 percent from July, seasonally adjusted, Statistics New Zealand said in Wellington today. Core retail sales, which exclude car yards, fuel outlets and workshops, rose 1.2 percent.

Rising consumer confidence, increased immigration and a stronger housing market are buoying spending as the economy emerges from its worst recession in three decades. New Zealand’s dollar rose as traders bet a strong recovery may prompt central bank Governor Alan Bollard to raise interest rates sooner.

“It appears household consumption will make another positive contribution to growth in the third quarter,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “The economic data emerging from New Zealand of late certainly raises the chances of earlier policy tightening.”

New Zealand’s dollar rose to 73.79 U.S. cents at 11.30 a.m. a.m. in Wellington from 73.43 cents immediately before the report was released.

Sales were expected to gain 0.5 percent, according to the median estimate in a Bloomberg News survey of 11 economists. Spending fell 0.5 percent in July and was unchanged in June.

‘Patchy Recovery’

Gross domestic product increased 0.1 percent in the three months through June, the first growth in six quarters.

Bollard said on Sept. 10 a “patchy recovery” is under way and growth will remain modest until next year. The official cash rate needs to stay at a record-low 2.5 percent until late 2010 to provide stimulus to the economy, he said.

Seven of 11 economists surveyed by Bloomberg News last week say Bollard will raise the cash rate by at least a quarter point before June 30. Kevans expects the first increase will be in July.

Traders tip the rate will be 4 percent by October next year, according to an index calculated by Credit Suisse based on swaps trading.

Buoying spending, net immigration rose to a four-year high in August. House prices gained for a fifth month in September, Quotable Value New Zealand, the government valuation agency, said yesterday.

Consumer Confidence

Consumer confidence jumped to a four-year high in the third quarter, Westpac Banking Corp. and McDermott Miller Ltd. said in a report last month.

Retail sales increased in 16 of the 24 store categories measured in today’s report, led by clothing and hardware.

The monthly sales series isn’t adjusted to exclude price movements and sales. Fuel costs rose 4.3 percent in August, according to government figures. Food prices fell 0.9 percent.

Clothing and fabric store sales jumped 6.5 percent in August as warm weather bolstered purchases, the statistics agency said. Hardware store sales gained 7.2 percent. Spending at bars and furniture stores also increased.

Supermarket and grocery store sales, which make up a fifth of the total, fell 0.2 percent. Department store sales rose 2.4 percent, the first gain in four months.

Purchases from fuel outlets rose 1.9 percent as prices increased. Vehicle dealer sales fell for the first time in three months, declining 1.4 percent.

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