While statistics aren’t most people’s cup of tea, there’s a reason why most people won’t like the latest retail and inflation numbers out from StatsNZ.

Sales in those retail industries where most discretionary spending goes have seen falls over the last quarter. This includes lower (seasonally adjusted) sales for the three months to May 2008 in industries such as furniture and floor coverings (-17.9 percent), recreational goods (-8.0 percent) and personal and household goods hiring (-5.0 percent).

While you shouldn’t place too much emphasis on bumpy monthly data, some industries appeared to have rapid falls in May, with reduced sales in the takeaway food (-2.9 percent), other food (-12.7 percent) and appliance retailing (-7.1 percent) industries.

Overall, seasonally adjusted sales fell by $69 million over the month of May (-1.25 percent). Although the $5.466 billion level of sales was 1.1 percent higher than in May a year ago, this is likely to only be an increase on ‘paper’. Most of the dollar value increase will be due to higher prices rather than higher sales volumes. This is the second consecutive fall in three monthly sales; if these were GDP statistics, this would indicate a technical recession.

Where has the money gone? Some of it is likely to have gone into servicing mortgages and belt tightening as property investors drop investment properties that don’t look like they’ll perform in slowing housing market conditions. But there is a clear surge in the fuel sales: automotive fuel sales climbed 3.2 percent in the month of May and to a level that was 24.8 percent higher than the same month a year ago. In the short term, with no change to the number of dollars coming in, there’s less to spend elsewhere when more dollars have to be poured into the gas tank.

While there are options for investors, many people with investment interests are buckling their seatbelts for the predicted soft landing. Those on tighter budgets are feeling the pressure of the cost of buying the basics in StatsNZ’s consumer basket.

This includes expenditure on transport. Vehicle retailing is a sentinel measure of discretionary spending. Seasonal sales in this industry fell -18.2 percent in the previous three months, with a -14.8 percent hit in the last month alone.

Rising international commodity prices for some goods, and New Zealand’s weakening exchange rate, mean goods cost more in New Zealand – if they’re available. For example, cereal prices have surged due to tightening supply and rising demand for cereals. Drought in Australia and crop-switching in the United States towards bio-fuel crops has clipped cereal supplies. At the same time, demand has risen rapidly, particularly in the United States, which saw an 11.8 percent rise between 2007 and 2008. This has hit New Zealand, for example, with higher rice prices and some bare shelves for certain packet sizes. Consumer price index data for June 2008 show that bread and cereal prices rose by 10.2 percent in the last year.

US economist Paul Krugman recently suggested we’re caught somewhere between a real, but temporary, resource crunch and a concern that we’re “generally running out of planet to exploit”. Technological advance has helped hold back a range of resource constraints in the past. But current global economic conditions – competing demand from emerging economies and high oil prices – present a new environment. These conditions plus technological advances have put pressure on basic food stocks. That is, advances in bio-fuel production and high oil prices have pushed us along the ‘production possibility frontier’, which shows the trade-off of scarce resources going into higher bio-fuel production at the cost of food production.

This picture, combined with the flat outlook for the New Zealand economy, looks to continue to put the dampeners on discretionary consumer spending. The trade-offs at the global macroeconomic level will flow through to New Zealand households who also face constraints. High inflation eats into any pay rises, if you’re lucky enough to get one. So with no real rise in incomes and more money having to be spent on increasingly expensive essentials means less discretionary spending.