New Zealand retail sales have increased to $22.9 billion, up 3.8 per cent on the on same period last year, in the traditionally slow second quarter of 2018, according to a new report by Retail NZ.

This result, while impressive, does not translate to improved business confidence, with 36 per cent of retailers surveyed not expecting to hit sales targets in the next three months – the lowest level recorded by the quarterly survey.

The issue is compounded by the fact that half of retailers didn’t meet their own sales targets in the second quarter.

“While some retailers are performing well, the reality is that many smaller businesses are finding it tough to compete,” Retail NZ general manager for public affairs Greg Harford said.

“Retailers face substantial pressures in rents, wages, and insurances, and the decline in the value of the dollar will mean imported goods cost more of the coming months. These cost pressures are compounded by the highly competitive retail environment, meaning that even small cost increases can be strongly felt by retailers operating on very tight margins.”

Harford said retailers should welcome the Reserve Bank’s recent announcement that interest rates will remain low over the next 12 months and expected increases in state sector wages, which could lead to increased consumer spending.

Retailers are noting improved e-commerce results and benefits from marketing online and on social media platforms, according to the report. Some retailers are also optimistic about the recently announced GST changes, which ensure tax is charged on all online purchases.

Liquor was the best performing category for the quarter, increasing by 12.6 per cent, up $45 million.

Eighteen per cent of retailers noted that retail prices rose over the quarter, compared to 11 per cent in the previous quarter – a significant jump after almost two years of stability.

Moving forward, 39 per cent of retailers expect prices to increase further, up from 32 per cent.