Retail sales rose a greater than expected 1.5% in November but once sales in vehicle related industries are stripped out, core retail sales fell 0.2% which was well below economists' expectations and signals a cautious attitude to discretionary spending among consumers.
Statistics New Zealand said the value of seasonally adjusted total retail sales rose 1.5%, or by NZ$82 million, in November. This follows a 2.4%, or NZ$133 million, drop in October when Goods and Services Tax (GST) was increased to 15% from 12.5%.
Sales of motor vehicles and parts jumped 11.8%, or by NZ$69 million, in November and fuel retailing sales rose 3.6%, or by NZ$20 million.
In contrast, core retail sales - which exclude the motor vehicle-related industries - slipped 0.2%, or by NZ$7 million. Economists had expected overall November retail sales to rise by 1.1% to 1.2% and core sales to rise 0.5%.
"Nine of the 13 core industries recorded increases in November 2010, however, these increases were offset by a decrease in supermarket and grocery stores sales," said Louise Holmes-Oliver, Statistics New Zealand's business statistics manager.
Supermarket and grocery stores sales fell 2.8%, or by NZ$40 million. All other food and drink related industries also recorded decreases in November.
Confirmation of soft November core retail sales follows Statistics New Zealand saying earlier this month that the total value of electronic card transactions fell a seasonally adjusted 1.2% in December from November.
ASB economist Christina Leung said the 0.2% drop in core retail sales suggested households remained cautious in regards to discretionary spending. She said the continued increase in petrol prices was likely to be adding to this caution.
"Beyond the volatility surrounding the pre-GST spend-up, the underlying trend in retail spending remains subdued," Leung said.
"This adds to the recent softness in activity data, and with inflation pressures contained for now there is little urgency for the Reserve Bank to resume the reduction of monetary policy stimulus. We expect the Reserve Bank will leave the Official Cash Rate (OCR) on hold until the September meeting, and retain the same cautious tone in its January OCR Review statement next Thursday," Leung added.
Meanwhile, Holmes-Oliver said the sales trend for total retail has been rising since February 2009 but has flattened over the past year.
"The sales trend for core retail has risen since February 2010 but has flattened in recent months. In actual terms, total retail sales rose 2.5% (NZ$136 million) in November 2010 compared with November 2009," said Holmes-Oliver. "Core retail sales rose 0.6% (NZ$28 million) over the same period."
(Updates add detail of December electronic card transactions, chart, economists' core sales expectation, comments from Christina Leung].