You might think you’re at an auction with the latest retail trade stats – Going… going… ?

The retail sector was subdued in the last quarter. Although quarterly sales were higher than a year ago (2.2 percent), the quarter-on-quarter statistics show a slow down: seasonally adjusted sales fell by 0.2 percent. The slowdown is widespread, as although 18 of the 24 retail industries increased sales between the March and June quarters, the value fell.  Growth in expanding industries was low and was offset by declines in other retail industries.

In particular, motor vehicle retailing (-5.1 percent) and recreational goods retailing (-3.2 percent) fell over in the last quarter.  The largest quarterly increase was in household equipment repair services (7.0 percent). This may reflect a switch from new construction to renovation, a rush as concerned property buyers try to tidy up their properties for a quick exit and a shift by homeowners from switching houses to improving the one they have.

There were price falls in some retail industries relative to the same quarter a year ago. Statistics New Zealand’s retail trade price index recorded falls of 8.6 percent for appliance retailing, 2.2 percent for chemists and 1.7 percent in department stores. However, the majority of industries saw inflation. Actual retail sales for the year to June 2008 rose by 4.5 percent, while volumes only rose by 1.5 percent. This indicates inflation of 3.0 percent across the retail sales industries. 

Retail trade inflation, however, can be higher than overall CPI inflation and may be offset by slower elements elsewhere in the economy. Therefore, it should not be a concern to the Reserve Bank. However, while retail prices are still going up, they’re not rising as quickly as usual. This indicates that some retailers are feeling the cold hand of the economic slowdown holding down their prices, and in some cases retailers may be dropping prices to move stock. Just as at auctions, when there are more sellers than buyers prices don’t go very high before the auctioneer’s hammer falls.