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New Zealand?s Retail Sales Plunged 1.2% in Q1 of 2008
Jun 16, 2008

The New Zealand retail sales fell by 1.2%, the fastest pace in last 11 years, in Q1 of 2008 due to rising interest rates and petrol prices, and decline in consumer spending.

Statistics New Zealand announced in May 2008 that in Q1 of 2008, New Zealand retail sales fell by 1.2%, the fastest decline in last 11 years (since 1998). The sales declined sharper than 0.3% predicted by economists, as reported by Forbes.

Nearly 17 out of the 24 sub-industries in the New Zealand’s retail market, such as footwear retail, food retail, and other housing compliances linked to retailing, showed fall in sales in the first three months of 2008. The New Zealand retail sales volume was further declined by 6% slump in auto sales. New Zealand’s supermarkets and grocery market sales, which comprise one-fifth of the total New Zealand retail market, also recorded a 1% drop.

The chief reason for decline in New Zealand retail sales in Q1 of 2008 was the high interest rates and spiraling petrol prices in the country, forcing consumers to curb their expenditures. Low consumer spending and increased food prices left hardly any fund for buying discretionary goods, and thus affected retail sales in New Zealand. Furthermore, fast declining housing industry owing to elevated home loan rates in the initial three months of 2008 was also responsible for the fall in the New Zealand retail sales.

Also, jobs in New Zealand dwindled very fast in March 2008, which made consumers to curb their spending in the domestic retail market. Owing to unemployment, consumers spending capacity was limited and they were competing for their profession, thus retail sales fell in the Q1 of 2008.

However, in spite of economic imbalance, inflationary pressure signifies that there won’t be a possibility of cut down in rates in future. Moreover, tight market conditions, surging commodity prices and the expansionary financial stance of the government will keep inflation high.

According to a Research Analyst at RNCOS, “Poor financial conditions and an economic slump are primarily responsible for fall in the domestic retail sales in New Zealand. Government should slash interest rate, as it is an effective method of increasing customer spending. Retailers should also extend profitable schemes to attract clients to the retail market.”

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