Shoppers spending-up in the March quarter kept the economy afloat

Monday, 24 May 2021

Higher retail spending on electronics and outdoor recreational goods this summer helped boost overall spending in the March quarter, Stats NZ said today.

After adjusting for price and seasonal effects, total retail sales rose 2.5 per cent in the March quarter following a 2.6 per cent fall in the December quarter.

Electrical and electronic goods had the largest increase, up 8.4 per cent, followed by recreational goods, up 16 per cent.

Sales for both categories fell in the December quarter, down 0.3 per cent and 14 per cent respectively.

Retail spending has shown resiliency in the first quarter of the year. (File photo)

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Stats NZ retail business manager Sue Chapman said higher spending on electronics coincided with falling prices for computers and phones.

“In addition, recreational and outdoor sporting goods were top of the list for many New Zealanders over the summer holiday break,” she said.

“Many were enjoying the ability to travel around the country for camping, water or biking activities, and the opportunity to attend large events such as the America’s Cup.”

Total sales rose $1.6 billion, or 6.5 per cent, in the March quarter.

A year on from the country’s alert level 4 lockdown that began in the last week of March last year, there had been a year of uneven spending across retail, Chapman said.

Industries that have remained strong over the year to March 2021 were motor vehicles and parts, up 24 per cent ($740 million), hardware, building, and garden supplies, up 19 per cent ($407m) and electrical and electronic goods, up 26 per cent ($239m).

Infometrics economist Paul Barkle says supply pressures could cause a lift in inflation in the near future.

Supermarket and grocery stores had mixed results throughout the Covid-19 year while remaining open as essential businesses.

Their sales have fallen a record 5.2 per cent ($309m) compared with an increase of 13 per cent ($665m) in the March quarter last year.

Industries that showed consecutive falls throughout the year were fuel stations, down 6.1 per cent ($137m), and accommodation, down 10 per cent ($128m) compared with the same period last year.

ASB senior economist Mark Smith said the lift in retail proved to be much stronger than expected.

“We no longer expect a first quarter dip in GDP [gross domestic product], with the consumer keeping the New Zealand economy afloat,” he said.

The strength of the sales volumes was generalised, with few signs of supply disruptions affecting retail activity or boosting retail prices, he said.

Durable retail was particularly strong over the past three months.

“While a second quarter pullback in retail trade activity is possible, we retain our positive outlook for retail volumes over the remainder of the year,” Smith said.

Infometics economist Paul Barkle said there was a lot of promise in the underlying strength of the first quarter figures, particularly considering the absence of international tourists during the summer months.

The past 12 months had been volatile after the lockdown that limited general spending but the March spending figures pointed to more normal spending levels, he said.

Barkle said he believed increased cost pressures due to supply disruptions would probably increase inflation in the near future.