Retail spending slows as cooling house prices put damper on economy

Westpac senior economist Satish Ranchhod says March quarterly spending figures are much lower than expected

Flat retail spending in the first three months of the year signals the economy is slowing, an economist says.

After an adjustment for price and seasonal effects, total retail sales volumes in the March quarter rose a mere 0.1%, Statistics NZ says.

This is despite rising job numbers, high migration and record international tourism. The modest rise compares with the 1.4% increase in the December 2017 quarter.

Westpac senior economist Satish Ranchhod says: “It was a soft start to the year for retail spending. [It] was well below analysts’ forecasts, including our own, for a gain of around 1.0%.

"Much of the weakness in spending was concentrated on vehicle and fuel spending. These were dampened by falls in petrol prices and delays with vehicle importation."

He says the downturn chimes with other signs that the economy is slowing.  

“We expect household spending growth will remain modest over the coming year as the housing market cools in response to government policy changes.

“Population growth is also expected to ease back gradually over the next few years. Indeed, today’s lower than expected net migration result reinforced that view.”

Electronics spending up
New Zealanders are spending more on electronics and appliances but less on clothing and footwear, the figures show.

Of the 15 retail industries, seven had higher sales volumes in the March 2018 quarter, and eight experienced lower sales volumes. The largest industry increase came from a record dollar value rise in electrical and electronic goods retailing (up 5.4%).

"Steady growth in sales volumes for electronics and appliances have led the rise this quarter,” retail trade manager Sue Chapman says. “There has been sustained growth in this industry for some time, with sales trends rising over the past 10 years."

Other industries with large movements were:

  • supermarket and grocery stores (up 1.0%);
  • pharmaceutical and other store-based retailing (up 2.7%); and
  • clothing, footwear, and accessories, which had the largest decrease (down 5.0%).

When the effects of price changes are included, total retail sales values rose 0.2% ($58 million) in the March 2018 quarter, following the 1.7% ($379 million) rise in the December 2017 quarter.

Of the 15 retail industries, seven recorded higher sales values and eight lower sales values in the March 2018 quarter.

Petrol price increases contributed the largest rise, up 3.4% ($70 million). This is the second consecutive increase for fuel after a 4.3% ($84 million) rise in the December 2017 quarter.

The largest decreases in the March quarter were clothing, footwear and accessories, down 5.1% ($49 million) and motor-vehicle and parts retailing, down 1.1% ($38 million).

In actual terms, the value of total retail sales was $23.1 billion in the March 2018 quarter, up 3.4% ($757 million) from the March 2017 quarter.

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Who's going to be the first to compare these figures from the streets with Robertson's rainbows and rose-coloured tinted projections we heard in the budget last week?

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Comes a time when people can nolonger afford the cost of their borrowings, and that time has arrived.

Long term affordability always wins the day, and its clear the banksters are pulling up the shutters; the fair weather sailors they are.

Theres very little discipline in society now, with few having an understanding that debt has to be paid back. Property prices and rents cant keep going up. Rents are already subsidised by government says it all.

Pity the politicians dont have the courage to tackle this problem, by regulating price to earnings ratios, and requiring the banks to only lend the amount of deposits they hold.

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Well said Richard. You may be interested in the below snippett from yesterday's doings at the Australian Financial Services Commission.
Banks confess new lows with business loans
The big four banks, Suncorp and BOQ have been cowed by the Hayne royal commission into confessing fresh examples of poor behaviour including fraud, incorrectly taking the homes of customers, overcharging and hounding customers over debts on the first day of hearings into small business lending.
The admissions were contained in submissions by the banks and were summarised by counsel assisting Michael Hodge QC as he set the scene for a damaging examination of how banks have treated small business operators and guarantors following earlier hearings that revealed abhorrent practices and claimed the scalps of AMP's chairman and its CEO.
Mr Hodge read from a list of examples of misconduct or conduct falling below community expectations performed by the banks, including the failure to notify ASIC of breaches, failure to complete credit checks, charging for services not provided, incorrect and incomplete loan applications and the failure to provide notice before taking action.
Among the key confessions were ANZ's admission that a pair of business bankers colluded with third parties to write 47 fraudulent loans, Commonwealth Bank's charging of merchant fees where the services were not being used, NAB's failure to provide appropriate warnings and disclosures to guarantors and three instances where Westpac took inappropriate enforcement action against customers where assets, including homes, had been repossessed

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Here's a bit more.
The admissions did not stop with the big four, however, with Bank of Queensland revealed to have been the subject of 3200 external dispute resolution cases since 2009. BOQ also revealed that it had been charging business loan customers incorrect rates and fees. But the bank told the commission it did not consider there to be any systemic issues within its small lending business.
Suncorp made admissions of a similar magnitude including the failure to issue notices to 54,000 customers about changes to their loans which it reported as a breach of the national credit code. A systems error at Suncorp also triggered an incorrect $4 million margin call to some customers.Following is a link to the whole article
http://www.afr.com/business/banking-and-finance/financial-services/banks...

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Not just figures from the street but also figures from international organizations that track country stats.

Robertson needs new glasses.

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The new car dealers I know are still pumping.

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Just means more DEBT Gary, I doubt folks are paying cash for their new cars. IS there any breakdown of who's buying, who's leasing? Maybe the government is buying some for the homeless, cheaper than a house. Just being skeptical, but not about the DEBT

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Yeah,the buyers are probably using there house as a ATM.

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Yes, it's truly a great system Gary. Mr & Mrs Kiwi borrow money (debt) on their house from a bank that doesn't have any money to lend anyway but which can take away the house if they don't pay but at least they will/may still have a newish car to live in if they lose the house! Seems a bit illogical to me, but then, what do I know? I don't have an economics degree

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You don't have to be a rocket scientist to see whats going on here.

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Mr Waterhouse?
Are you seriously suggesting that it be illegal for an individual to turn some of his equity in his property to cash? Using a bonafide bank to facilitate and oversee the transaction?
And that somehow it is the business of all "right-wing" NBR readers/posters and the Labour coalition if he does?

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Mr. Morrison,I am not suggesting that for one moment. An individual can most certainly turn his equity into cash and do whatever he likes with it, go on a world cruise, buy a million pairs of shoes for his wife, whatever. I do take issue with your reference to "using a bona fide bank" Banks DO NOT LEND MONEY! They don't have any! They simply issue "promises to pay" but don't actually EVER PAY! I am using capital letters purely for emphasis, not to shout. There is no way to place words in bold type for emphasis. I am also a bit confused as to how you appear to come to the conclusion in your final paragraph, would you care to explain? Finally, with respect, if you believe in "bona fide (law : made in good faith without fraud or deceit) banks" I suggest, if you haven't already, that you check out some of the "stuff" that is coming out about the "bona fide banks" in the Royal Commission in Australia. I wouldn't call NBR readers right wing, maybe the bulk of them support National but I am at a loss about some of what you say. Maybe you would like to comment further and enlighten me/other NBR readers a little

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"Do not lend money"? Then what is it they lend?
It is the borrower who creates the credit, not the bank, it is the borrower who, with eyes wide open and of his own free will, approaches the bank for credit, using his equity as collateral.
How else would you have it? Would you rather the RBNZ increase the money supply through WINZ?
Re Aus banks? It seems you too believe that the ANZ should be hung, drawn and quartered for "promoting their own product"?

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Good Morning Mr. Morrison. I think that we could get into a protracted debate on this, but here is not the place.
I respectfully suggest that you do some research on how the banking system REALLY works. Here are a few suggestions
1)The Positive Money New Zealand website "http://www.positivemoney.org.nz/" would be a VERY good start as there is a lot of factual information there as opposed to the propaganda and disinformation put out by the vested interests
2) The approximately 18 minute video "Modern Money Mechanics" "https://www.youtube.com/watch?v=2q-7d1PO_oQ"
3) The "Money As Debt" movies.
Finally, I will just del with the points that you raise
a) What DO they lend? They actually lend NOTHING because they have NOTHING to lend.
b) The "borrower" goes to the bank simply because he can't afford to pay cash. If there was no debt, there would be no money. DEBT is what keeps the "system" going and when nobody can afford any more debt, that wil be when it finally falls apart.
b)What about the borrower who has no security?
c) "AUS Banks" It is the present system that should be done away with and replaced by an HONEST money system.

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I do agree that this "is not the place" for the sort of conspiracy theories that you want to high light.
I actually thought that Social Credit along with Marxism was discredited long ago. It seems I was wrong.
This nation, along with every other nation, has progressed as a result of the back hard work and equity building of the private individual.
And, in the foreseeable future, in spite of all the exactions. regulations, taxation, and efforts of conspiracy theorists and socialist governments, will continue to do so.
Human nature demands that it will.

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Labour Zimbabwe Party will tax all hard working Kiwis into submission.

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If the economy is slowing while we still have huge immigration, then things can get very ugly very quick with Labour's 1950's command economy inclinations and hostile foreign investment policies. A bit more widespread Bovine disease or similar added to the those policies could be a tipping point into a recession that will shake the country and the currency.
Cost of living rising and economy falling = PAIN

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Labours Petrol Price Hikes are hurting working class Kiwis ! Experts predict $3 a litre in 6 months thanks to Labours Petrol Tax and Oil Ban !

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I was listening to my daily x22report today and it mentioned "New Zealand retails sales take a dive, " which intrigued me after this NBR article. I went and had a look and found this
"http://www.scoop.co.nz/stories/BU1805/S00261/retail-card-spending-falls-... Interesting eh? Be interesting to see what the situation is at the end of June

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