Void ahead in economic outlook
AUCKLAND: New Zealand’s retail sector is showing early signs of improvement as spending recovers, but economists warn the increase in domestic spending won’t be enough to fill the void from having no international visitors over the summer months.
The latest Retail Radar report canvassing the state of the sector shows overall retail spending over the past six months from March to September was down 2.7%. An improvement on the 6.4% drop in the six months to August.
Monthly sales for September were up 19.6% on the corresponding time last year and just under twothirds of retailers met their sales targets, the Retail NZ report outlined.
Encouraging spending figures aside, industry experts said the sector remained ‘‘fragile’’ and it was too soon to assume that this was the start of a recovery.
Greg Harford, chief executive of Retail NZ, said the outlook for the sector was looking ‘‘much more positive’’ than it was just six weeks ago.
‘‘While the September results were really good, in the last six months spending is down nearly 3%. It’s not as bad as it could be, and much better than anyone was predicting back in April, but it does point to the fact that while we may have some good months there is still a long road to recovery,’’ Mr Harford said.
‘‘Seventyeight percent of firms are now saying they are confident they will make it through the next 12 months — that’s a big step up from where we were in August.’’
ASB Bank senior economist
Mark Smith said New Zealanders were spending more than they typically would and had been covering the shortfall in spending from few international visitors.
Mr Smith said prospects were looking up for retail, but the rosy outlook was not expected to last. At the end of September, MBIE spending figures showed levels had returned to where they were last year.
‘‘We went into a very big hole during the lockdown and we’ve pretty much bounced back to where we were this time last year, and that’s despite spending from people with overseas cards being down
60%,’’ Mr Smith said, adding that spending increases were being driven by purchases of durables.
‘‘People have spent a lot more time at home, and have looked to nest building. Home and recreational retailing, things to do with kitting out the home, has been very strong.’’
With New Zealanders not being able to travel overseas, many were spending more at home domestically. Without this, the sector would be in a much worse state, Mr Smith said.
Low interest rates had boosted domestic spending and a strong housing market was underpinning more spending but economists were wary of a turnaround in unfavourable conditions.
The unemployment rate was expected to move above 7% by the end of the year and with summer months on the horizon, traditionally peak tourism, this was when the impact on the retail sector would be felt.
‘‘There won’t be as many or any people coming in and those [overseas visitors] tend to provide a kick for retail during the summer months. With those absent there will be more of a void. Yes not as many New Zealanders will be going overseas but that still won’t make up for that shortfall of fewer overseas visitors.’’
From November and December, Mr Smith anticipated there would be big drop in spending figures.
‘‘At the moment, the timing of the year has helped us, interest rate caps by the Reserve Bank has helped us, the wage subsidy from the Government has helped us, but the time of the year will change and be less favourable.
‘‘Things are going really well now, and [will] hold up probably for the next month or two, but it’s really that Christmas period that we’re a bit more concerned about . . . peak time for retail.’’