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NZ: 0.2% gain in Q3 retail effectively huge – BNZ

Craig Ebert, Senior Economist at BNZ, notes that Statistics NZ this morning reported a 0.2% increase in September quarter retail trade volumes. At first blush this does not sound impressive, one little bit, but really it was, considering it followed a 1.8% jump in June quarter spending that was demonstrably boosted by New Zealand’s hosting of some major sporting events, he further adds.

Key Quotes

“While the Q3 retail outcome was close to market expectations (+0.1%) it obviously held up far better than we thought. We were looking for a volume decline of 1.0%. So we have some explaining to do. As it transpired, nominal expenditure growth was stronger than we had figured on from the monthly trends in electronic card transactions, as well as assumptions we made about cash spending by visiting sporting fans.”

“Importantly, it wasn’t a case of retail volumes coming in better because the retail deflator grossly undershot our expectations. The latter was about flat for Q3. This was close to what we were thinking, on the basis of the CPI components we knew about beforehand. The annual rate of inflation in the retail deflator was 1.2% in Q3. This maintained a positive run this year, after it tended to run negatively over the prior few years. This “recovery “in retail inflation will be reinforced by the further moderation we’ve seen in the exchange rate over recent months.”

“To be sure, technically speaking, today’s retail data gives us a bonus regarding Q3 GDP computations. But this is more to shore up the 0.7% we still expect on that account, rather than pushing it above that for now. We are still a little nervous about Q3 GDP growth being up to scratch.”

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