Manufacturers Federation Bulletin No. 2/2001

5 March 2001

BULLETIN NO. 2/2001

Brief Comments on Statistics Recently Released

Retail Sales ¡V December 2000

„« Nominal retail sales growth increased by 5.1% in the December quarter (compared with the December 1999 quarter), reflecting a slowing in the rate of growth from the 5.6% increase recorded in the September quarter.

„« Nominal retail stocks increased by only 3.7% in the December quarter, a significant improvement on the 9.2% increase recorded in the September quarter.

„« There were, however, marked differences in the stock levels recorded for individual retail sectors. Stocks increased by over 10% for clothing and soft goods retailers, personal and household services and cafes, restaurants and takeaways. By comparison falls in stock levels were recorded by appliance and motor vehicle retailers and hardware stores.

„« Inflation adjusted retail sales growth slowed sharply in the December quarter, with growth of just 0.4% over the December 1999 quarter. The growth rate has fallen rapidly over the last six months, with growth of 4.0% recorded in the month of June and 1.5% in September.

„« While nominal sales growth has fallen more slowly, there has been a sharp increase in retail prices. It is estimated overall retail prices increased by 1.4% in the December quarter and were 4.8% higher than those recorded in the December 1999 quarter.

„« Rising oil prices and the fall in the exchange rate have been the major contributors to the increase in retail prices, but there have also been significant increases in some sectors where a high proportion of product sold is New Zealand made.

„« Furniture prices, for example, increased by 4.3% in the December quarter and by 5.6% from December 1999. It appears the fall in the exchange rate has boosted the cost of inputs for the sector, particularly for wood and panel products. Government decisions to cut the supply of indigenous timber have contributed as well.

„« It is interesting to note in comparison that motor vehicle prices increased by 2.9% from the December 1999 quarter and appliance retailers increased prices by just 1.9% in the year to December 2000.

„« Nominal retail sales growth remains much stronger in the South Island, with growth of 7.9% in the December quarter (from December 1999). In the North Island the increase was only 4.2%. Since estimated retail prices increased by 4.8% on a national basis, this would suggest there was a fall in retail sales volumes in the North Island.

„« The slowdown in retail sales growth was more marked in the two main North Island urban centres, with nominal growth of 3.9% in Auckland and just 1.9% in Wellington. The retail sales data for Wellington is in marked contrast to the recent data in the Household Labour Force Survey (HLRS) which suggested employment in Wellington had gown by 6.0% over the December quarter. While there are possible explanations for a difference between the two series (such as an increase in savings or an increased proportion of part-time work) the small size of the HLFS sample means there are likely to be quite high sample errors for the regional employment data.

„« Recent Reserve Bank data shows that there has been a slowing in the level of borrowing by the household sector, but with growth of 7% in the year to December household debt is still growing faster than incomes.

Source: Statistics NZ

Value of Building Work Put In Place ¡V December 2000 Quarter

„« The value of new residential dwelling construction declined by 21.9% in the December quarter from December 1999, while the value of residential additions and alterations was down 5.4%.

„« Residential building activity for the 12 months ended December, however, was still 5.5% up on the previous year, reflecting the very strong growth which occurred in the March 2000 quarter.

„« Non-residential building activity increased by 6.0% in the December quarter with strong growth in the hospital and nursing homes, education and commercial sectors.

„« Nominal building activity for the total sector declined by 9.5% in the December quarter, but was up 6.4% for the 12 month period.

Building work put in place
Percentage change from the same quarter of the previous year

Source: Statistics NZ

Labour Cost Index ¡V Survey & Wage Rates ¡V December 2000 Quarter

„« Salary and wage rates (including overtime) increased by 0.4% in the December quarter and were 1.6% higher than in December 1999.

„« On an annual basis, public sector salary and wage rates rose by 1.8% while private sector salaries increased by 1.5%.

„« In the December quarter 53% of employees had not received an increase in ordinary time salary and wage rates over the previous 12 months. While this was slightly down on the September quarter, this ratio has been fairly stable for the last three years.

„« There was no change in the proportion of the labour force receiving annual increases of more than 5%, but there was an increase in the proportion receiving increases of between 3% and 5% (10% of the labour force).
Source: Statistics NZ

Producers Price Index (PPI) ¡V December 2000 Quarter

„« Output prices rose by 2.2% in the December quarter, lifting prices by 6.8% from December 1999.

„« In the manufacturing sector output prices rose by 2.6% in the December quarter, and by 9.2% in the 12 months to December 2000. However, excluding meat and dairy processors, the increase in the quarter was only 2.1% and the annual increase to December was 7.9%.

„« The annual increase in prices for the meat sector was 19.7%, while dairy prices increased by 12.3%. Not all sectors were able to benefit to the same extent from the fall in the exchange rate. While prices for paper and paper products increased by 15.5%, prices in the wood and wood products sector increased by just 6.7% and basic metal prices were up 6.9%.

„« Input costs continue to increase faster than output prices, with a 3.6% increase in the December quarter and an annual increase of 10.2%.

„« In the manufacturing sector, there was a similar increase in input costs with a 3.4% rise in the December quarter and a 11.7% rise in the 12 months to December.

„« A major factor in the rise in input costs over the quarter was the fall in the exchange rateearlier in 2000. While there was an appreciation in the exchange rate later in the December quarter most of the prices used for the index were based on the exchange rate as at15 November.

„« There has now been a significant appreciation in the exchange rate over the last three months, to the extent that some cross rates are higher than in August last year. This is likely to reverse much of the rise in input costs seen in the December quarter PPI.

Exchange Rates
(Published by WestpacTrust Bank)
Mid-rates for NZ$1.00

USA
($NZ:$US) UK
($NZ:Pound) Australia
($NZ:$AUS) Japan
($NZ:Yen) Europe
($NZ:Euro)

15 August 2000 0.4455 0.2967 0.7680 48.7212 0.4924
15 November 2000 0.3897 0.2734 0.7546 42.1526 0.4559
15 February 2001 0.4276 0.2934 0.8106 49.67 0.4656

Percentage Change
August-November -12.5 -7.9 -1.7 -13.5 -7.4
November-February +9.7 +7.3 +7.4 +17.8 +2.1
August-February -4.0 -1.1 +5.5 +1.9 -5.4

%share of total imports 17.2% 3.8% 22.0% 11.1% 11.0%

„« The data for the December quarter also shows the ongoing impact of oil price rises last year. Input costs in the transport sector rose by 12.2% in the quarter while output prices rose by 4.0%.

Peter Crawford Phone: 04 496 2813 (wk)
Trade and Economic Analyst 04 389 8945 (hm)

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