The sting of slowing sales hit retailers during the June quarter of 2019, with the pace of spending slowing due to a soft housing market and slowing population growth, said Westpac NZ.
Retail volumes rose 0.2 per cent during the quarter – below the 0.7 per cent increase seen in the prior quarter.
On an annual basis, retail sales grew at a rate of 2.9 per cent – far below the 6 per cent growth seen in recent years.
“The big factor that has been weighing on spending appetites is the softness in the housing market,”
Westpac senior economist Satish Ranchhod said.
“New Zealanders hold a large proportion of their wealth in housing assets. The subdued pace of house price growth has been a significant drag on both confidence and retail spending, particularly in Auckland.”
According to Ranchhod, spending patterns were mixed across retail categories.
Sales in electronics and recreational goods rose by 5 per cent and 6.2 per cent respectively during the quarter, while groceries fell 0.9 per cent.
Sales in furniture and homewares fell 3.3 per cent – a stark drop from the 5.4 per cent gain seen in the prior quarter.
Spending rose 4.5 per cent in Auckland, 4.4 per cent in Wellington, and 2.5 per cent in Canterbury. The remainder of North Island rose 4.6 per cent, and 3.7 per cent in South Island.
Annual population growth has also slowed to around 1.6 per cent, after peaking at just over 2 per cent in 2016.
However, while Ranchood expects retail to remain soft through the remainder of 2019, the same is not true for 2020.
The housing market may recover after the recent reduction in fixed mortgage rates, which would give a boost the consumer confidence, while wage growth may be seeing the beginnings of an improvement.
“Nevertheless, spending growth is still likely to be more moderate than in recent years, as population growth is continuing to slow,” Ranchhod said.