New Zealand’s retail sales volume fell 0.7 percent quarter-on-quarter in the first quarter, with some major moves supporting this. Supermarket and grocery volumes recorded a strong growth of 8.5 percent quarter-on-quarter, while liquor sales grew 6.1 percent, reflecting the pre-lockdown scurry. Accommodation, motor vehicles and parts, recreational goods, clothing, and furniture dropped between 9.3 percent and 6.2 percent quarter-on-quarter.
On a year-on-year basis, sales volumes decelerated to 2.3 percent from fourth quarter’s 3.3 percent. Nevertheless, core sales volumes, which exclude volatile components like petrol, lifted 0.6 percent quarter-on-quarter, with annual growth accelerating from 3.3 percent in the fourth quarter to 4 percent. Core spending is likely to weaken considerably as households begin to reign in their spending, noted ANZ in a research report.
Total sales values dropped by less than volumes as higher prices provided an offset. Nevertheless, the deflationary nature of this shock is likely to see price pressures dissipate rapidly. Inflation expectations are already at record lows.
“Q2 retail sales are expected to be very weak, but there will be volatility in these data nonetheless. We expect to see a sharp rebound from Q3, but with unemployment high, household incomes lower, and uncertainty elevated, it will only be partial”, added ANZ.