Data surprise bad news for rates
Seasonally adjusted retail sales increased a stronger-than-expected 0.3% in October, putting pressure on Reserve Bank to either hold off easing or increase interest rates.
Friday, December 15th 2006, 7:09AM
The 0.3% rise in sales in October exceeded the median prediction of a 0.1% rise.
"In its recent monetary policy statement, the Reserve Bank made it clear that if the data surprises on the upside in coming months, it will increase official interest rates next year," Macquarie Research said.
When vehicle-related industries were excluded, core retailing sales were up 0.2%, while vehicle-related industries sales increased 0.5%, Statistics New Zealand said.
Actual retail sales for October were up 5.9%, compared to a median prediction of 5.6%.
SNZ said the October figures followed a 1.1% seasonally adjusted increase in September.
GoldmanSachs JBWere said the Reserve Bank will draw some comfort from the fact that the October figure was weaker than September.
"But the recent upswing in house sales will likely keep the RBNZ wary.
"We expect the Reserve Bank to hold the overnight cash rate at 7.25% and commence easing in September 2007."
BNZ said the October figures were amazing in that they built on the strong September numbers.
"So we're left with the distinct impression that retail spending is accelerating, and fast." Of the 24 industry groups surveyed, half had recorded sales increases in October, and half decreases. Only three had sales movements of more than $6 million, with motor vehicle retailing up $26m (4%), supermarket and grocery stores up $12m (1.1%), and automotive fuel retailing down $17m (3.4%).
The trend in total retail sales had been increasing since May 1998. While the rate of increase eased during the last months of 2005 and early 2006 it had risen again recently, SNZ said.
The sales trend for motor vehicle retailing appeared to have reached a turning point, after a period of decline that began in March 2005, but caution was needed until more data was available.
The 3.4% fall in automotive fuel retailing followed falls of 3.7% in September and 0.5% in August.
The trend in automotive fuel retailing had been generally increasing for much of the past three years but appeared to have reached a turning point in June, with the trend moving down 4.4% since then.
Regionally, seasonally adjusted retail sales changed little in Auckland and Wellington in October, compared to September, SNZ said.
Waikato region's sales were up 2.4% ($11m), while in the rest of the North Island sales rose 1.1% ($13m).
Excluding Canterbury, sales in the South Island rose 1.8% ($11m), while Canterbury's sales were down 0.4% ($3m).
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