14 May 2013

Stronger economy, house prices to underpin spending

8:37 pm on 14 May 2013

Economists expect that stronger economic activity and rising house prices will underpin robust retail spending in the coming year.

Statistics New Zealand figures released on Tuesday show seasonally-adjusted retail sales rose 0.9% to nearly $18 billion in the three months to March - an increase of more than 3% compared with the same period a year ago.

Consumer spending has been rising under the triple effect of an improving economy, the gathering pace of the rebuild in earthquake-hit Christchurch and rising house prices, which is making people feel more wealthier.

But the increase is uneven regionally, with stronger sales of hardware, appliances and electronic goods propelling Canterbury and Auckland in the past year, while Wellington, which has been affected by public sector cuts, slipped back.

Economists expect consumer spending to remain robust, though some say high debt levels, an increase in Kiwisaver contributions in April, and cuts in government spending could dampen consumption.

There was a stronger demand for cars, fuel and groceries, Statistics New Zealand figures show.

Clothing and footwear sales fell during a warmer than usual start to autumn, although figures out last week showed a colder April has reversed that.

Excluding price changes, volumes rose a modest 0.5%, with the rebuilding of Canterbury showing up in stronger building and hardware sales.

Director of economics and strategy at First NZ Capital Chris Green says a stronger economic recovery is underpinning growth in consumer spending.

"I guess it's also notable that the Canterbury region remains the strongest region in terms of growth of retail sales as well."

Retail spending has been picking up since mid-2009.