New Zealand Q3 2015 retail sales up 1.6%

After pausing for air in June, retail sales growth rebounded in September. Over the quarter, the volume of goods sold was up a solid 1.6%, leaving sales up 5.7% over the year. 

Looking into the details of the report, spending was up across 10 of the 15 retail categories. We've seen particular strength in spending on durable items such as furnishings, as well as a pick-up in the purchase of motor vehicles. There have also been strong gains in spending on food products and non-store retailing. By region, spending was up strongly in the North Island, especially Auckland and Waikato. In contrast, there has been some pull back in spending in Canterbury. 

Today's report also highlighted that inflation in the economy remains subdued. Combined with strong population growth and low interest rates, low prices have provided a significant boost to spending. With the labour market softening and the economy facing headwinds domestically and offshore, it is likely that we will see spending growth slowing down over the coming year. 

The implications of today's data for monetary policy are mixed. The resilience in retail spending through mid-2015 is encouraging. But at the same time, today's report highlighted that inflation in the economy remains subdued. On balance, today's data have not prompted to change in the views on December cut. There was only a limited fall in the NZD in response to today's data.