Retail sales were “stronger than expected” over the December quarter, according to Westpac, which it attributed to the rise in disposable income afforded by the Government’s Families Package.

Total retail sales rose 1.7 per cent over the quarter, above the forecasted 0.7 per cent increase, with strong sales in the pharmaceutical industry (8.2 per cent growth) driving the increase, following a 3.5 per cent sales decline in the September quarter.

Sales of electrical and electronic goods grew by 4.6 per cent, while food and beverage services increased 4.2 per cent after having fallen 2 per cent in the September quarter.

Clothing, footwear and accessories also saw a sales increase of 4.1 per cent over the period.

“A key reason for the strong December quarter rise in spending was the sharp drop in petrol prices,” Westpac New Zealand senior economist Satish Ranchhod said.

“With petrol prices falling sharply in late 2018, households have been hitting the stores again.”

However, spending growth has not necessarily led to higher prices, Ranchhod said, with the increase in international players as a result of online shopping have ensured prices stay flat.

This is putting increased stress on retailers, who are already struggling with cost pressures, particularly in regards to wages.

“We do expect to see some increases in retail sector pricing over the coming year. However, the extent of these increases is still expected to be moderate,” Ranchhod said.

According to Stats NZ, the total value of retail sales in the December quarter 2018 grew 4.5 per cent year on year to $26.3 billion.