New Zealand retail trade volumes rebounded in the three months to December, advancing 0.9 percent on the quarter after no change in the three months to September and a sharp decline in the three months to June. The volume of sales rose 0.2 percent on the year after dropping 2.5 percent previously. Officials at the Reserve Bank of New Zealand began to cut policy rates in August and have now reduced rates by a cumulative 175 basis points. This appears to have boosted consumer sentiment.

The increase in headline sales volumes in the three months to December reflects offsetting moves across major categories. Sales fell on the quarter for supermarkets and motor vehicles but there were strong increases in sales for department stores and electrical and electronic goods. Sales also rose in values terms, up 1.4 percent on the quarter after a previous fall of 0.5 percent, with year-over-year growth in sale values picking up from a fall of 2.8 percent to an increase of 0.2 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.