Housing slowdown reins in spending

Spending growth eased in the September quarter, amid signs consumers may be pulling back in a slowing housing market.

The retail trade survey showed that sales volumes climbed 0.2 per cent in the three months to September 30 compared with the previous quarter, while sales values climbed by just 0.1 per cent.

On an annual basis, sales volumes growth fell to 4.1 per cent, the lowest since early 2014.

Much of the fall was down to the unusual strength in sales in the June quarter.

In dollar terms, food and beverage saw the biggest fall of the 15 sub-categories, with sales dropping by more than $75 million, while accommodation dropped by about $40m.

Statistics New Zealand retail trade manager Sue Chapman said the June quarter saw major boosts from the Lions tour and the World Masters Games, boosting food sales and accommodation.

‘‘However, the reverse has occurred this quarter, with both of these industries falling.’’

While retail spending was expected to fall in the September quarter, ANZ said a fall in spending on ‘‘big-ticket’’ items such as motor vehicles and furniture was ‘‘what you’d expect at a time of a weak housing market’’.

Motor vehicles and parts fell 0.8 per cent while furniture and floor coverings dropped 2.6 per cent.

"When we go out and speak to car yards and big department stores, things have softened off."

ANZ senior economist Philip Borkin

‘‘Anecdotally, when we go out and speak to car yards and big department stores, things have softened off,’’ ANZ senior economist Philip Borkin said, adding that typically when the housing market was weaker, spending eased.

‘‘When you’re a household and you look at your balance sheet and the asset side is no longer growing as strongly as it was, then I think the risk is you’re not going to spend all that income windfall and you’ll build up a little bit of precautionary savings.’’

Borkin said annual spending growth could fall to about 2.5 per cent during 2018.

Although this was slower than in recent years, it should not be ‘‘alarming’’, he said.

‘‘There’s still some clear positive drivers. You’ve got a labour market that’s doing well, there’s some signs that the dial on wage growth is starting to point a little more upwards, population growth is cooling, but it’s still growing at an OK rate.’’

While visitor arrivals may have peaked, Borkin said a weaker New Zealand dollar could boost tourist spending. ‘‘The strength of the dollar doesn’t have much of an impact on whether people come here, but it has a major impact of how much they spend once they’re here.’’

ASB senior economist Mark Smith said given that the quarter included a period of election uncertainty, the ‘‘becalmed’’ housing market and a ‘‘post-Lions tour hangover’’, the figures appeared ‘‘solid’’.

Smith predicted that annual sales volumes would continue to ease, to about 3.5 per cent by the end of the year.

‘‘We expect annual retail spending growth to continue to moderate over the remainder of the year given the sluggish housing market and easing consumer confidence.’’