here’s an air of confidence amongst retailers, as figures releasee this week show New Zealand’s retail industry experienced record high total sales results during the December quarter. Retail purchases rose to a high of $21.8 billion, but sales won’t be as strong in the months to come. Plus, we explore whether rising private debt should be a concern for retailers.
The latest Retail Trade Survey by Statistics New Zealand reveals a record total sales value of $21.7 billion for the retail sector for the last quarter of 2015. This was a 5.3 percent rise in the value of total actual retail sales when compared with December 2014 quarter.
During the final quarter of 2015 (October to December) New Zealand’s retail sector witnessed the total volume of retail sales rise by 1.2 percent from September 2015 quarterly.
Twelve of the 15 sectors within retail also experienced higher sales volumes compared to September 2015. However, pharmaceutical goods, recreational goods and motor vehicles all witnessed a decline in total sales value.
“Combined with strong population growth and low interest rates, low prices have provided a significant boost to spending,” said Westpac senior economist Satish Ranchhod.
Hardware, building and garden supplies experienced the largest rise in sales with a record increase of 5.3 percent while also recording a 5.5 percent increase in total sales value ($88 million). Other industries that experienced significant rises in the December 2015 quarter include accommodation (six percent), fuel retailing (2.5 percent) and food and beverage services, up 1.4 percent.
This lines up with what Matthew Shay, chief executive of the world’s largest retail body, the National Retail Federation (NRF) said at shop.kiwi on Tuesday.
He said people are spending much less on what retailers consider to be “traditional retail” and more on experiences, like travel and hospitality.
Matt Nolan, senior economist at Infometrics, says: “The retail industry rising.. customer number growth (due to rising tourist numbers and strong net migration) and the increase in spending on durable products, suggests that the industry is experiencing a period of reasonably strong demand”.
Retail NZ general manager of public affairs Greg Harford said consumer spending in the past three months has been boosted by low interest rates and increased visitor numbers, as well as the Christmas period.
“The next three months are looking slightly less rosy, however the majority of our members expect to meet sales targets and retain staff levels. This is traditionally a slower time of year for retailers as we return to work and get back into normal spending routines,” he said.
Is the rising private debt a point of concern?
The latest data comes off the back of Southern Cross Financial’s release that stated that too many kiwis burying their heads in the sand when it comes to debt. The figures released by Statistics New Zealand indicated that consumer spending was rising and that the proportion of this spending that was on credit cards had hit its highest level since October 2006.
Taking the debt factor into consideration, is there is a reason for concern from New Zealand’s retail industry?
Nolan says that there is no need for concern over the rising credit card debt as, “Rising use of credit cards makes sense for current aggregate spending trends as households are purchasing an increasing number of durable products – durable goods offer a service to a person over time, so it makes sense to borrow to finance them”.
“With population growth staying strong, and the corresponding demand for new household durable goods also holding up, 2016 is likely to see fairly strong consumer spending growth.”
Nolan believes that New Zealand retailers should be very optimistic about 2016.
“With population growth staying strong, and the corresponding demand for new household durable goods also holding up, 2016 is likely to see fairly strong consumer spending growth,” he says.