NZ: Retail Trade

August 11, 2016 05:45 CDT

Consensus Actual Previous
Q/Q percent change 1.0% 2.2% 0.8%
Y/Y percent change 5.5% 4.8%

June quarter volume of total retail trade sales were up 2.3 percent - the largest percentage increase since the December 2006 quarter. This quarter's increase follows a 1.0 percent rise in the March 2016 quarter. Twelve of the 15 industries had higher sales volumes, with some Auckland retailers in particular saying they had an extremely busy quarter.

Sales were boosted by the hardware & building supply trades. Strong vehicle sales also continued. Hardware, building & garden supplies were up 5.0 percent. Motor-vehicle & parts were up 2.6 percent. Pharmaceutical & other store-based retailing was up 5.2 percent and food & beverage services were up 3.3 percent.

The seasonally adjusted value of total retail sales rose 2.2 percent for the June 2016 quarter. This is also a record rise in dollar terms for total sales value and follows a subdued 0.8 percent rise ($164 million) in the March 2016 quarter. On the year, sales were up 5.5 percent.

Retail trade data tracks changes in New Zealand retail sales. As consumption contributes heavily to New Zealand's GDP, a rising retail sales figure can be indicative of rising demand and subsequent inflation. While strong economic growth is typically good for the New Zealand economy, uncontrolled growth and rising inflation may lead to instability and corrective action from New Zealand's central bank. The release was recently changed from monthly to quarterly. The headline numbers are the percentage change in retail trade from the previous quarter and the percentage change in retail trade from the previous year.

Consumer spending accounts a large portion of the economy, so if you know how consumers are behaving, your will have a good indication as to where the economy is headed. Needless to say, that is a big advantage for investors. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.