Retail Trade - July Provisional
Statistics NZ estimate that total retail sales increased 1.1% mom in July. The market was expecting growth of 0.2% mom. Excluding motor vehicles sales and servicing store-types, retail sales are estimated to have increased by 1.7% mom.
We caution against reading too much into the seasonally adjusted movement reported by Statistics NZ. Growth of 1.1% mom does not fit our assessment of the strength of household spending in July, and certainly does not accord with indicators of consumer confidence.
Our own estimate of seasonally-adjusted sales - which allows for trading day adjustments - points to growth of 0.2% mom in July following similar growth in June. Indeed, our estimates - which imply that retail sales have been broadly flat since consumer confidence plunged in May - seem much more plausible at an intuitive level than those reported by Statistics NZ.
The difference between our own estimate and that of Statistics NZ likely reflects the treatment of outliers; the fact that Statistics NZ adjust at a lower level of aggregation; and the use of differing packages (we use X11 whereas Statistics NZ use X12). We will be following up the reasons for the difference with Statistics NZ. If the official estimate is misleading, as we suspect, the official estimate of retail sales for August is likely to print much weaker than underlying trends would suggest.
The yoy% change in unadjusted retail sales was 5%, consistent with our annual indicators. Unlike the seasonally adjusted mom% change, the yoy% change was marginally weaker than we were expecting.
Excluding motor vehicle sales and services, even stronger growth of 1.7% mom was reported by Statistics NZ. The downward contribution from motor vehicle sales and services likely reflects a decline in motor vehicle sales - total motor vehicle registrations fell 10% mom in July. Petrol prices in July were, on average, around 4% higher than in June, providing some offset to the fall in vehicle sales.
Nominal sales are currently receiving a boost from rising prices and strong growth in tourist spending (in other data published today, tourist arrivals in July were 17% higher than a year earlier).
Our own estimates of seasonally adjusted retail sales imply that the volume of spending by households has remained flat at best since the beginning of this year.
To conclude, although we remain more bullish on the outlook for the economy than many market commentators, at this stage we are skeptical that today's data heralds the beginnings of a recovery in the household sector.
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