Retail

Spending on the rise over the holiday period

Wednesday March 11, 2015 Masrur Alam Khan

The latest data reveals that Kiwis spent more over the last holiday season than in 2013.  The December 2014 quarter sales for both the core retail sector and the total retail industry rose by more than 4.7 percent on year-earlier levels.  The core sector measure excludes the motor vehicle sales, service and petrol sub-sectors.

 

retail sales

 

The data also suggests that New Zealanders have received more bang for their buck during the festive season with year on year sales volumes rising by close to 4.5 percent.  This was due to a record strong Kiwi dollar, sector wide price discounting, low global inflation and a fall in producer prices.

 

The strongest growth in turnover occurred in the bar, cafe & accommodation sub-sector (up 12 percent on year-earlier levels) while the strongest growth in volume occurred in the furniture, hardware and appliances sub-sector (up 9 percent).  This suggests that solid growth in tourism and migration over the past year has had a noticeable effect on the hospitality industry while retailers are still willing to pass on their reduced importation costs through price discounting.  In addition to that it also indicates that consumer confidence was solid as consumers were willing to purchase durable goods during the festive season.

 

Interestingly, supermarkets did not receive much of the Christmas cheer as the sub-sector barely managed to post positive growth.  

 

It is worth noting that the motor vehicles and related sub-sector also performed well with turnover rising by almost 4 percent on year-earlier levels.  This was primarily driven by strong demand for new motor vehicles which according to motor vehicle registration data rose by 22 percent (or the equivalent of another 39,150 vehicles) throughout New Zealand.  The Auckland region accounted for almost half of all newly registered motor vehicles followed by Canterbury (17 percent) and Waikato (9 percent).

 

Although there are usually many factors (such as taxes and registration fees) that have to be considered when trying to explain growth in the demand for motor vehicles, in this case it is safe to say that it is primarily being driven by the strong exchange rate; especially against the Yen.  It is also worth mentioning that demand is likely to fall in the near future as New Zealanders will have to compete with Australians in the Japanese used motor vehicle market following the Australian government’s recently introduced policy to legalise the importation of second hand motor vehicles from Japan.    

 

Electronic card transaction data confirms the pick-up in spending.  The value of transactions for the 3 months to December was up more than 7 percent on year-earlier levels.

 

transactions

Regionally, the growth in retail sales is led by Auckland and Canterbury.  These regions recorded a seven percent increase in turnover on the previous year.  This is consistent with the recent increase in tourism and migration, as well as the impact of the ongoing infrastructure re-build in Christchurch.  

 

In contrast, sales growth over the last 12 months has remained steady in the Wellington region while it has contracted by one percent in Waikato.  This signals the presence of imbalance of growth in New Zealand with some parts of the country growing rapidly while others struggle.