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NZ: Retail sales volumes were soft in Q3 - ANZ

Phil Borkin, Senior Economist at ANZ, explains that while slightly stronger than expected, New Zealand’s retail sales volumes were soft in Q3, rising a modest 0.2% q/q (mkt: 0.1% q/q) and it follows strong quarterly growth in Q1 and Q2 of 1.6% q/q and 1.8% q/q respectively.

Key Quotes

“In per capita terms, spending levels fell (-0.3% q/q) for only the second time in the past five years.”

Reflecting the impact of key tourist events in Q2, hospitality-related spending fell. The likes of accommodation and food and beverage services spending was boosted sharply in Q2 on the back of tourist spending associated with the World Masters Games and the British and Irish Lions rugby tour. Both unwound those gains in Q3, falling 4.4% q/q and 3.1% q/q respectively.”

“But spending on big-ticket items was patchy too. Spending on motor vehicles and parts fell 0.8% q/q, which follows a strong run of growth and is the first quarterly fall since Q4 2015. Furniture and floor covering spending (-2.6% q/q) also fell.” 

“Overall it was a mixed picture. Seven of the 15 retail industries recorded lower sales volumes in the quarter, while on a regional basis, seven of 16 regions recorded lower sales values. Nominal spending in Auckland rose 0.8% q/q, but the North Island was up only 0.2% q/q overall.” 

“We expect a softer pace of consumer spending growth going forward. A decent labour market backdrop and income growth will remain supportive. However, we suspect that at a time when the asset side of households’ balance sheets are looking a little less rosy, households will look to build precautionary savings. At a time when population growth has started to cool and visitor arrivals growth is also moderating, increased household caution should see consumer spending grow at a more modest pace than has been the case in recent history.”

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