Sales recorded by the New Zealand retail industry dropped in Q2 2008 in the backdrop of spiraling inflation, high interest rates and falling export.
As per Statistics New Zealand, the retail sales in the country dropped 1.2% in the second quarter of 2008 over the first quarter of 2008. It was also the first time in a decade when the retail industry volume had fallen consecutively in two quarters, as reported by The National Business Review.
Retail sales dropped seasonally and inflation-adjusted 1.5% in the second quarter of 2008. The seasonally-adjusted retail sales in New Zealand dropped 0.2% to $35 Million in the second quarter of 2008 against the previous quarter (Q1 2008). Vehicle sales also came down by 5.1% to $102 Million in the second quarter and grocery and supermarket sales dropped 1.4% to $51 Million.
New Zealand’s retail industry sales downfall is due to rising inflation in the country. High inflation has resulted in more spending on basic necessities on account of spiraling food and fuel prices, leaving consumers to cut down their expenses on clothing and dining out. Another key factor for slump in retail sales is rising interest rates on mortgages.
Moreover, New Zealand economy was badly hit in the first quarter of 2008 by drought, falling exports and record increase in interest rates that hampered consumer spending. As a result, the country’s retail industry witnessed plunge in its sales. Apart from this, the local currency of New Zealand appreciated in the second quarter of 2008, affecting its retail sales.
The fall in retail sales indicates that the country’s economy is passing through recession that led to slow growth in the second quarter of 2008. Under such conditions, the Reserve Bank of New Zealand reduced interest rates by quarter points in July 2008 and it is hoping that rates might come down further.
According to a Research Analyst at RNCOS, “The retail industry of New Zealand is reeling under intense pressure from unfavorable business conditions such as high interest rates, declining income levels, rising inflation, sluggish growth in exports and hence, a slowly growing economy. It will hit retailers in the country as they are already incurring losses. The cumulative effect of falling retail sales will fall on the country’s economy as well as GDP.”
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