Retail sector sales buoyant

Wednesday June 07, 2017

With the continuing solid foundation of strong employment growth and tourist visitor arrivals, the retail sector remains in buoyant mood.  The core sector, which excludes motor vehicle related industries, is registering sales close to 5% above those of the previous year.  While slightly below the heady heights of 6% to 7% growth in earlier years, sales continue to expand in an accommodative environment.  Low interest rates, solid house prices, and a positive employment picture add to the confident consumer story that keeps the tills ringing.  Deducting the impact of price inflation, the volume of sales are still expanding at a respectable 4% per annum.



Noticeably, sales in the motor vehicles and related industries are expanding at double-digit rates.  Some of this expansion would be related to the increase in petrol prices early this year (from an average $1.70/litre in March 2016 to $1.90/litre in March 2017).  However, car sales continue to soar, with new car registrations up over 9% on year earlier.


Within the core retail sector, the expansion is concentrated in the leisure and visitor spending industries.  In particular, the bars, cafes and accommodation sector has benefitted from the influx of visitors – as well as domestic holidaymakers.  In a related manner, non-supermarket food sales are also growing at above the retail sector average.  Interestingly, sales in the furniture, hardware and appliance sub-group, which are close to 7% above year earlier, is a further indication of confidence in future income and employment prospects.  These big-ticket items are also closely related to household formation, which will be being bolstered by migration-influenced population growth at all-time highs.


This story also fits with the boost to GST revenue being recorded in the Government’s accounts.


In contrast, sales in supermarket, department stores and clothing & footwear sub-groups remain relatively subdued.  This will be influenced by the relatively low inflation numbers in these categories, assisted to a degree by the high NZ$ exchange rate keeping a lid on the price of imported products.




These figures are supported by latest electronic transactions data.  The value of electronic transactions in the 3 months to April were 5% above year-earlier levels. These numbers also reinforce the importance of the visitor sector to this industry, with the growth in transactions in the hospitality sub-sector outstripping other components within retailing.  However, this data does indicate a gradual slowing in growth, although there won’t be too many retailers complaining if expansion continues in the 4% to 5% per annum range.  And with tax cuts kicking in in April next year, such growth rates are set to continue.