Retail sales weak just before Christmas

Paymark reports retail sales down 0.8% on last weekend before Christmas vs year ago

22nd Dec 10, 2:56pm by Bernard Hickey

Paymark, the electronics payments network that handles about 75% of such payments in New Zealand, has reported the value of transactions handled last weekend (December 17 to 19) was down 0.8% from the same period a year ago.

Wet weather may have affected sales on the last weekend before Christmas, but Paymark also noted a cautious approach by many shoppers.

Deleveraging has been one of the economic themes of the year as households try to repay high debts and avoid unnecessary spending. This has slowed economic growth, given about two thirds of the economy is linked to consumption spending.

This has been a factor in the Reserve Bank indicating it will leave the Official Cash Rate on hold at 3% until the middle of next year, which means floating mortgage rates are also seen stable until then. Wholesale market interest rates have nudged lower in recent weeks on the more subdued outlook for growth and inflation. This has been a factor in banks trimming some of their fixed mortgage rates and deposit rates.

Paymark reported that the value of sales from December 1 to December 21 had risen 3.8% to just over NZ$3 billion, with particular weakness later in December. This was weaker than the 4.6% growth trend seen across both October and November.

"The first three days of December started off with a countrywide shopping boom, however the following 18 days have not been quite as kind to retailers," Paymark said.

"Wet weather during the last full weekend before the big day (Friday 17th – Sunday 19th) put a damper on the shopping spirit, and spending data over these three days mirrors that, with the value of sales down 0.8 per cent when compared to the same time last year," it said.

Paymark CEO Simon Tong said the data reinforced the continuing trend of caution amongst shoppers.

“Retailers are still having a tough time of it and while we have seen an increase in sales over the last few months, it’s important to note that the increases have been very mixed across sectors,” he said.

“We have also noticed a pattern when it comes to how people are shopping. Kiwis aren’t reaching for their credit cards as much any more, preferring to use their own money. In the first 21 days of December shopping Eftpos spending is up 5.3 per cent and credit is up a lesser 2.0 per cent,” he adds.

Caution over the first 21 days was most evident in Nelson and the West Coast, which saw growth of 2.3% and 0.5% respectively.

See more detail below from Paymark's release.

Wellington remains amongst the slowest regions, with a slow 2.2 per cent growth rate.

More positively, Southland continues to track well, with an annual growth rate of 5.7 per cent and was also one of the regions to record strong sales over the last weekend, with growth of 4.6 per cent (both year-on-year). When looking at sectors, it’s good news for kids – small toy shop sales are up 12 per cent while sales at the large, general retail stores are up 3.5 per cent so it looks like stockings will be filled.

Kiwis can also expect to see a lot of books and specialty food items under their trees this year, with these sectors experiencing good growth of 5.0 per cent and 18.0 per cent respectively (year–on-year).

Also doing well in terms of year-on-year comparisons are general food stores (+ 5.4 per cent), fast food outlets (+ 9.6 per cent) and auto repairs (+ 6.0 per cent).

Sectors on a bit of a ‘go-slow’ include the recently well-performing footwear category (+ 2.9 per cent), furniture stores (+ 3.6 per cent), and jewellery/watch stores (+0.3 per cent)

. Sectors not faring as well include music shops (- 20.1 per cent year-on-year), garden centres (- 5.1 per cent year-on-year) and camera/photography shops (- 4.8 per cent year-on-year).

Simon Tong says that there are many reasons for the mixed spending patterns this Christmas.

“This Christmas has been affected by a number of factors; big sales and heavy discounting starting earlier in the year, bad weather on the last shopping weekend prior to Christmas, restraint in spending on luxury and big-ticket items and perhaps a general feeling of keeping things a bit more subdued than in the past,” he concludes.

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20 Comments

by Bernard Hickey | 22nd Dec 10, 3:02pm 1292983339

FYI these figures aren't adjusted for GST.

So given the 2.2% or so increase in prices, that 3.8% growth from a year ago is pretty anemic, and it's slowing from October and November.

I get a sense the GST increase and tax cuts (which benefited those on higher incomes more than the rest) gave the economy a big kick in the guts.

It's winded right now.

cheers

Bernard

by muzza | 22nd Dec 10, 3:53pm 1292986424

Bernard, not sure of your logic as thought Wellington had one of the highest per capita incomes, who would have most benefitted by the tax cuts, so how come it was among tthe regions with the lowest growth rate (or may be used extra money for deleveraging)??

And there's still plenty of wind there.

by ex agent | 22nd Dec 10, 3:53pm 1292986399

I have been talking to a friend today who is involved in a large business selling appliances and he said retail all over NZ has been dreadful since the 1st of October 2010 and that this christmas was his worst ever. He is expecting a lot of shops to close down in the new year. Unfortunately this is not great for the country as a lot of New Zealanders are employed by such small retail businesses and if they lose their jobs this will only add to the current burden on the taxpayer in the area of benefits. What this country currently needs is some increased confidence on the part of the public and some sensible growth in retail spending otherwise the economy as a whole is going to come under even more stress than it currently is under. People will say there are too many retailers but they do employ a lot of people. If they get laid off who is going to give them a job?

by muzza | 22nd Dec 10, 3:57pm 1292986621

ex Agent,should show your thoughts to my wife as she has been on a spend-up, big time, will make her feel even better .

by ex agent | 22nd Dec 10, 4:21pm 1292988084

Muzza I have been authorised by the NZ Retailers Association to thank your wife on behalf of all retailers. She is a remarkable lady and the country or rather the economy needs more like her.

by Number 6 | 22nd Dec 10, 4:49pm 1292989799

So do you advocate that we get stuck back into property speculation, so that all the agents, lawyers, valuers, mortgage approvers etc. don't lose their jobs? I know you think " that's different", but in reality.. it isn't. We can't get this country back on a solid footing by borrowing and spending more. And we don't have the savings base to 'just spend'; so it's down to a reduced spending....on everything....and more unempoylment...or reduced wages, to allow retailers etc. to keep 100% of their staff, rather than letting 20% go to make the book balance.

by Justice | 22nd Dec 10, 6:18pm 1292995137

Jobs based on buying shit we don't need nor can really afford are hardly worth worrying about. Blatant consumerism and property bubbles from NOW ON are history, or SOON will be. The gluttony of capitalism is over

by ex agent | 22nd Dec 10, 8:23pm 1293002611

Justice tell that to the poor blighters who will lose their jobs in the new year. The job scene is very tight in NZ at the moment so they are not going to get another job easily. We do not need more people on the dole. The economy is as good as in a recession again and only sensible spending will save it from carrying on that way.

by David B | 23rd Dec 10, 2:25am 1293024346

@ justice And the folly of socialism is about to start?

by spectreofdoom | 22nd Dec 10, 11:26pm 1293013606

Would love to chat with your friend - because I keep hearing the same sort of thing. The deep discounting going on this month would support that - yet sales are apparently only down 0.8% - seems uglier now than it was in the heart of the recession.....

by Horace the Grump | 22nd Dec 10, 4:00pm 1292986846

bernard,

Does Paymark provide any granular analysis of the data? For example, does it analyse transactions values (total spend / total transactions) for different retailer types? These sorts of numbers may be useful in looking at what shoppers are doing - for example, of the average transaction value has fallen that may point to other things related to spending habits etc etc.

Overall, the data shows, along with the number of pre-Xmas sales etc that retail is doing it tough this Xmas... don't expect this will help GDP much, but weak retail will keep interest rates lower for longer....

by Bernard Hickey | 22nd Dec 10, 4:05pm 1292987123

Horace

I've put everything they sent into the story. Good questions. Have to take Paymark with a few grains of salt.

It's very 'fresh' and doesn't include other networks, cash or cheques etc. The better numbers are the Electronic Card Transactions and full Retail sales. But they're so slow.

And I got your dig about interest rates. Fair enough.

cheers

Bernard

by Horace the Grump | 22nd Dec 10, 4:09pm 1292987362

Who pays with cash or cheque these days??? OK, some people still do but the vast majority would be using cards... do you know the % of sales that are not card based?

Well the point is about interest rates is that the RB ain't going to do anything on interest rates until is has to, and as long as each new data point continues to show the economy just bumbling along then there is no catalyst for rates to increase... just simple supply and demand really...

by Bernard Hickey | 22nd Dec 10, 4:09pm 1292987375

FYI Mortgage approvals ticked down last week after a few weeks of rises.

Must be approaching the Christmas mortgage approval slowdown

http://www.interest.co.nz/charts/credit/mortgage-approvals

cheers

Bernard

by Wolly | 22nd Dec 10, 5:46pm 1292993205

What is the total in billions being paid out by households to finance mortgage debt...money mostly leaving the country...QED the bubbles being protected by the RB covered bond game and by govt policies...are sucking what would otherwise be savings from the economy...causing unemployment to rise...driving a fiscal deficit into record country.

When households have no spare income...they stop spending...they get frugal....thrift enters the front door.

by spectreofdoom | 22nd Dec 10, 9:38pm 1293007101

Bernard,

Do you know whether these paymark retail sales include petrol? The price rises of the past few months could be sucking quite a significant chunk of capital out of other retail categories - hence the discrepancy between ex-agent's anecdotes and the relatively robust total retail sales figures. The figures seem stronger than the word on the street would suggest.

by muzza | 22nd Dec 10, 10:15pm 1293009343

Hugh, was it you that contacted Houston Strategies and said 'Houston, I think we have a problem'?

by PhilBest | 23rd Dec 10, 11:12am 1293055953

Hugh's connections are well made.

Check out this:

http://texanomics.blogspot.com/

"Economic growth" is NOT all about consumption based on debt based on house price inflation "collateral". The parts of the USA that did NOT have this from 1999 to 2007, matched the rest for growth anyway through that time - and it was REAL growth - and NOW, they've got no "hangover" either.

I keep saying, oh for a "great communicator" like David Lange, who can be honest with the voters about harsh reality.

by muzza | 23rd Dec 10, 1:15pm 1293063300

But David was not too honest with Naomi

by iconoclast | 23rd Dec 10, 1:38pm 1293064706

PhilBest 23Dec2010 states: I keep saying, oh for a "great communicator" like David Lange, who can be honest with the voters about harsh reality.

How quickly we forget, and how quickly history gets revised

A history lesson on how to get things done – Not so many years ago there was a National Prime Minister called Muldoon who spent 10 years alienating the electorate. The Labor side comprised Lange and his deputy Douglas who rode in to power into the vacuum Muldoon had created for himself. They had no manifesto, no promises, just talk, presenting themselves as a couple of nice guys. They swept into power. And the changes began. Their first six months in power they eliminated all government paid farm subsidies, closed or sold off government non-core departments. The key to their success was the delivery and speed of change. It was done by announcing one new change every week on a Monday morning. The electorate was kept off-balance wondering what was coming next. By the time one change was digested the next one came out. They governed by gazetted regulation. No upper house or States to worry about. They did it. They reduced personal income tax to 33 cents in the dollar and introduced a GST. They achieved a very great deal in their first twelve months. Lange kept the populace inspired with his soaring speeches, while Douglas explained the detail in simple five-word sentences that everyone could understand and couldn't argue with. By the time any thoughtful opposition was assembled the next change came out. It made your head spin. Lange marched the world stage, an ambassador of the world while Douglas became world famous for his Rogernomics. Sadly the crash of 1987 got in the way and undid all the good work.

Roger Douglas articulated (loudly) in the 1980's the need to reduce the level of direct taxation (from $0.60 in the $) and eliminate the unproductive parasites, the tax-lawyers, the tax-accountants who promoted tax-avoidance at a time when the tax-avoidance industry was the best investment going returning 60% return on each $ avoided. If Douglas had the opportunity to return he would probably increase OCR interest rates immediately and eliminate property speculation and provide incentives for production.