Retail sales volumes for the September quarter reflect the impact of higher interest rates
The total volume of retail sales rose 0.2%q/q in 3Q (JPMorgan and consensus 0.2%) after a downwardly revised 0.7%
contraction in the second quarter (previously -0.6%). Retail sales volumes have slowed dramatically over the past two
quarters, falling 0.5%; this contraction follows a 5.6% surge in the two quarters prior. The sharp slowdown in
consumption spending is reflective of the RBNZ's resolve to bring a heated housing market and domestic demand into line.
The RBNZ has tightened monetary policy four times this year, taking the official cash rate to a record high 8.25% - in
what has been a prolonged tightening cycle that began in 2004, and which has consisted of 13 rate rises. The RBNZ's job
is seemingly done, with both the housing market and consumption growth showing signs of cooling. JPMorgan forecasts the
RBNZ will keep rates on hold for the foreseeable future.
The retail sales report showed a significant pullback on the more discretionary areas of retailing. Sales of
recreational goods, clothing and softgoods, and footwear declined. In volume terms, 12 of the 24 industries recorded
sales increases, while the other 12 recorded decreases. The largest sales increases were in supermarket and grocery
stores (up 1.6%q/q), and cafes and restaurants (up 3.2%), highlighting the increase in food prices. The largest declines
were in recreational goods retailing (down 5.2%q/q), and clothing and softgoods retailing (down 4.4%). Overall, the
report showed a significant moderation in sales in 3Q.
The quarterly volumes outcome supports our preliminary 3Q GDP forecast of 0.8%q/q, which also consists of a 0.2% point
contribution for production out of the new Tui oil field.
Over the month of September, total retail sales rose a price inflated 1.0%m/m (JPMorgan and consensus 0.5%). The monthly
spike was driven by a surge in fuel prices, with half of the dollar value of the monthly increase coming from automotive
fuel retailing (up 5.1%).
ENDS