February proved to be another soft month for the retail sector. Following growth of just 0.1% and 0.3% in December and January respectively, total retail spending contracted by 0.7% in February.
When motor vehicle-related industries were stripped out of the Statistics New Zealand figures, core spending rose by 0.2%.
ANZ-National Bank chief economist Cameron Bagrie said a sharp drop in motor vehicle retailing (down 5.8%, or $41 million) drove the weakness in headline sales.
Supermarket and grocery store retailing (up 1.6%, or $19 million), which was thought to be mostly price related, was the major contributor to the increase in core retail spending.
The changes in other industries were much more muted with only six recording movements greater than plus or minus $3 million.
"A clear gap is now opening up between spending on fuel and food and other retailing.
Looking at individual trends, only food - we have to eat - petrol and tourism-linked sectors are positive. The remainder are flat to negative,'' Mr Bagrie said.
That was particularly the case for some key interest rate-sensitive sectors such as appliance retailing, he said.
The area covered by the Canterbury Regional Council boundaries showed a 1.4% fall in retail sales in February.
The rest of the South Island, which covers Otago and Southland, showed a 1.9%, or $13 million rise.
Mr Bagrie said given the softness seen in retail spending in January and February, his expectations were that March did not fare any better.
The factors weighing on consumer spending were well known: high energy and food prices cutting into purchasing power, falling house prices, high interest rates and uncertainty about the global economy.
"But if recent sharp falls in consumer confidence readings are to be believed, then further soft consumer spending is likely in coming months,'' he said.
Along with the housing market, the retaining environment looked likely to remain challenging as householders entered a period of debt reduction.
Mr Bagrie intended keeping a close watch on how a tougher retailing environment filtered through into labour demand given that retail employment had compounded at 3% a year during the past five years.
