— Reuters
WELLINGTON: New Zealand retail spending fell for a second straight quarter as high interest rates dented consumer sentiment, adding to signs the economy was in recession in the middle of the year.
Retail sales volumes fell 0.1% in the three months through September after dropping 1.2% in the second quarter, Statistics New Zealand said yesterday in Wellington. Economists had expected a 0.5% decline.
“While firmer than expected, the figures were broadly in line with the continued softness in economic growth that we’re forecasting in the September quarter,” said Satish Ranchhod, a senior economist at Westpac in Auckland.
The Reserve Bank of New Zealand (RBNZ) began cutting interest rates in August, but that has so far failed to spark a bounce in consumer spending in part because only a small proportion of home lending is on variable rates. Policymakers picked up the pace with a 50-basis-point cut in October, taking the official cash rate to 4.75%, and most economists expect another 50-point move this week.
The economy contracted 0.2% in the second quarter. Local economists predicted that gross domestic product (GDP) dropped further in the three months through September, which would mean a second recession in less than two years.
Spending was subdued even as incomes were boosted by modest income tax cuts, which took effect July 31. Weak household spending follows data showing that the manufacturing and services industries have been in prolonged downturns, while employment dropped in the three months through September. — Bloomberg
