Retailers had a rough Christmas

Latest figures confirm retailers had a rough Christmas, but there are some hopes an improvement may be under way.

Statistics New Zealand (SNZ) today said that in the December quarter the volume of retail sales fell a seasonally adjusted 0.4 percent, while the value of sales edged down 0.1 percent.

The largest volume decline was in vehicle and parts retailing, which is not seasonally adjusted, with a fall of 8.2 percent, after the sector had recorded the largest sales volume increase in the March, June and September quarters.

Fuel sales volume, also not seasonally adjusted, rose 6.4 percent in the latest quarter, and supermarket and grocery stores gained 1.9 percent.

Core retail volumes, which exclude vehicle-related industries, edged up less than a seasonally adjusted 0.1 percent, while core retail value was down 0.1 percent.

The volume of actual retail sales was 0.1 percent lower in the December quarter from a year earlier, while the value was up 1.5 percent.

For just the month of December seasonally adjusted total retail sales fell 1.1 percent from November, with core sales down 1.2 percent.

ANZ economists said today's data confirmed a weak end to 2010 for the retail sector.

The decline in volumes was not unexpected, given it was the first quarter of data since GST was lifted.

"But while 2010 ended horribly for retailing, electronic card transactions data showed a better read for January," the ANZ economists said.

"Obviously part of this was accounted for by food prices, but generally speaking the results looked solid across all components."

Despite that, the ANZ economists acknowledged that with housing turnover having slumped in January and prices continuing to trend lower, the environment was not encouraging for a sustained turn in consumer spending.

But they believe the economy is at an "inflection point", and improving hard data should start showing up in about six weeks time.

"Activity gauges for 2011 and forward-looking indicators suggest that the NZ economy has regained momentum on a number of fronts."

Goldman Sachs economist Philip Borkin said the weak housing market should ensure households continued to deleverage, despite improving income growth. He expected real household consumption growth of just 1.2 percent for 2011.

The weakness in December quarter retail figures may have come as a surprise to retailers, with a Goldman Sachs' estimate of the ratio of stock to sales at more than 30 percent, its highest level since at least 1995, Mr Borkin said.

The series was volatile, but if retailers had been surprised by the drop in demand after the rise in GST, then there could be a continuing trend of price discounting as efforts were made to clear stock.

Today was the last time SNZ will issue monthly retail trade data, with SNZ saying movements in monthly electronic card transactions were a reasonable substitute in indicating changes in household consumption spending. Quarterly retail trade statistics will still be published, meeting the need for detailed information.

The move to rationalise the production of two similar monthly indicators of consumption spending would lessen the load on respondents, SNZ said.