NZ retail sales surged 2.3% q/q - ANZ

Analysts at ANZ explained that the NZ retail sales volumes surged 2.3% q/q sa in Q2, far stronger than consensus expectations.

Key Quotes:

"In fact, it is the strongest quarterly growth since Q4 2006. Core sales, which strip out motor vehicle-related spending, surged 2.6% q/q, with gains broad-based across industries.

Compositionally, 12 of 15 retail sectors recorded higher sales volumes. Hardware, building and garden supplies led the way, rising 5.0% q/q, which clearly fits in with the broader construction story, although it admittedly does follow some softer quarterly outcomes. Pharmaceutical and other store-based retailing (5.2% q/q) and motor vehicle sales (2.6% q/q) also rose strongly. Perhaps the biggest surprise is that accommodation retailing fell 1.7% q/q. However, with food and beverage services up 3.3% q/q, there was still a strong “hospitality” feel.

On a regional basis, Auckland continues to outperform. On a nominal basis, Auckland sales growth rose 2.7% q/q, with annual growth of 9.5% q/q. However, the fastest quarterly growth was actually seen in Wellington (4.5% q/q) following four consecutive quarterly declines. Canterbury spending remains the laggard. It was flat in the quarter and is down 2.9% compared with a year ago.

Prior to these figures, the overarching theme for retailing (outside of the boost from tourism) had been one of household restraint. While spending had looked reasonable, it was relatively modest in per capita terms. The figures for Q2 change that picture, and show that strong house price gains may now be filtering into wider spending trends. To be fair, this growth is not evident in the likes of consumer lending or credit card statistics, so at this stage it is not a broad credit-fuelled story, but we will be watching to see how this progresses. If the latter begins to re-emerge, it would represent quite a different backdrop for the current account deficit and RBNZ.

Today’s figures add to other evidence (although not across the board) suggesting strong Q2 GDP growth. Our forecast remains 0.8% q/q, although we wouldn’t rule out something in excess of 1.0%."