NZ: Consumers like low inflation - BNZ

Doug Steel, Senior Economist at BNZ, suggests that the New Zealand consumers spent like there was no tomorrow in the second quarter of the year.

Key Quotes

“Sure there were relatively strong signals from the various spending indicators like electronic card transactions but today’s official retail sales figures far exceeded those and market expectations. The total value of retail sales in Q2 was some 5.5% higher than a year earlier. Strong.

The extreme strength in Q2 retail volumes today has us a bit wary of some potential payback in Q3. Before today, we anticipated 1% growth in Q2 and 0.8% in Q3. We got all of that – and some – in Q2 alone. For now, we have reduced our Q3 pick to +0.4%, awaiting the usual guidance from the monthly indicators ahead (not that they are infallible as witnessed by their guidance on Q2, but its all we’ve got to go on).

Today’s strong retail sales data renews the upside risk to our +0.6% Q2 GDP estimate that got tempered by the softer looking quarterly detail in the Quarterly Employment Survey a week or so back. It is likely we will be nudging our current Q2 GDP estimate higher on any further upside surprises.”