New Zealand retail trade volumes fell sharply on the quarter in the three months to December, dropping 1.9 percent after no change in the three months to September. Retail sales have been very weak for the last two years, largely reflecting the impact of aggressive policy tightening by the Reserve Bank of New Zealand, and the decline reported today was the equal-largest over this period. The volume of sales fell 4.1 percent on the year after dropping 3.4 percent previously.

The fall in headline sales volumes in the three months to December was broad-based across almost all major categories. Motor vehicles, food and beverage services, fuel, supermarkets and grocery stores, clothing, footwear, and accessories, and recreational goods were among the categories to record particularly sharp declines. Sales also fell in values terms, down 1.5 percent on the quarter after a previous increase of 0.8 percent, with year-over-year growth in sale values weakening from an increase of 1.1 percent to a fall of 0.4 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.