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Dec 11, 2008

New Zealand October Retail Sales Fall Amid Job Cuts

New Zealand’s retail sales dropped the most in more than four years in October as spending on cars fell amid a slowing economy, job cuts and weaker consumer confidence.

Retail sales declined 1.3 percent from September when they rose a revised 0.3 percent, seasonally adjusted, Statistics New Zealand said in Wellington today. Vehicle sales fell 15 percent, while core retail sales, which exclude cars, fuel and workshops, increased 0.8 percent.

“Consumers are becoming very cautious in light of the current uncertain environment, choosing to hold on to any spare cash,” said Khoon Goh, senior economist at ANZ National Bank Ltd. in Wellington. “Despite having more money in their pockets, job insecurity is starting to make people more cautious.”

New Zealand’s $130 billion economy is in the worst recession in 18 years as a housing slump and tightening global credit curbs spending and investment. Falling sales add to signs growth won’t return to the economy until next year when fourth-quarter tax cuts and interest rate reductions take full effect.

The New Zealand dollar extended gains after the retail sales report, trading at 55.20 U.S. cents at 12:05 p.m. in Wellington compared 55.17 cents before the report and 55.15 cents in Asia late yesterday.

Economy Contracts

New Zealand’s jobless rate rose to a four-year high of 4.2 percent in the third quarter and may increase further, economists say. A net 21 percent of companies expected to fire workers over the next year, according to a November survey by ANZ National Bank Ltd. The net number subtracts those expecting staff numbers to rise from those expecting a decline.

New Zealand’s economy contracted in the first half of 2008 and also probably shrank in the third quarter, making the recession the worst in 18 years. Reserve Bank Governor Alan Bollard last week predicted growth resumed in the fourth quarter and demand will recover slowly through 2009.

Bollard has cut the official cash rate by 3.25 percentage points since July to kick-start spending. The government lowered income taxes on Oct. 1.

Economists expected retail sales were unchanged in October, according to the median of eight forecasts in a Bloomberg News survey.

Retail sales dropped in 10 of the 24 store categories measured in the report, the statistics agency said.

Car sales posted the largest decline in more than 11 years. The sales trend is falling at the fastest pace since the agency began the series in 1995.

The monthly sales series isn’t adjusted to exclude price movements, so is volatile. The value of sales at fuel outlets and supermarkets fell as fuel and food prices declined, the agency said.

Sales at fuel outlets dropped 2.2 percent while supermarket and grocery sales, which make up one-fifth of all retailing, fell 1.2 percent. Spending at department stores, liquor outlets, bars and clubs also declined

Appliance store sales rose 7.6 percent. Accommodation and clothing sales also increased.

Source : Bloomberg
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