Data Flash (New Zealand)
NZ Retail Sales - October 2000 (Advance Estimates)
Key points
Statistics NZ estimate that the value of total retail sales decreased 0.1% mom in October, but was 5.9% higher than a
year earlier.
Excluding the motor vehicles sales and servicing store-types, retail sales declined by 0.1% mom. The impact of a 3.8%
fall in average petrol prices on sales of vehicle services appears likely to have been offset by higher motor vehicle
sales (motor vehicle registrations rose strongly during the month).
Commentary
The advance estimate has overstated the final estimate of retail sales by around 0.5% mom over each of the past three
months. It is unclear whether this pattern can be expected to continue in October.
Taking today's data at face value, although weaker than suggested by Friday's strong credit card data (see chart above),
the latest estimate is consistent with our forecast that consumption demand will remain flat in volume terms during Q4,
with GDP growth of 0.5% qoq driven by net exports.
The latest outcome - which is the weakest since March - suggests that the period of relatively robust sales activity,
driven in our view by `beat the price rise' purchases, may be coming to an end. If so, a rebound in consumer confidence
will be necessary if current retail levels are to be sustained. Our expectation is that such a rebound will occur over
coming months. However, as discussed in our October Economic Forecasts, the possibility of an extended period of weak
consumption demand, reinforced by the slump in the housing market, is a significant source of downside risk to overall
activity levels.
On that score, yesterday's very weak October housing turnover data (which saw sales fall 9% mom to 1991 levels),
together with today's net migration data (which revealed a net outflow of 850 persons in October, reversing the
improvement over the past two months), suggests that the housing sector is likely to remain depressed over the
foreseeable future.
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