RTTNews - Retail sales in New Zealand showed the biggest monthly rise in May since November 2007, mainly due to sales growth at core industries, the Statistics New Zealand said Monday.

The overall retail sales climbed by a seasonally adjusted 0.8% month-on-month in May after rising 0.5% in the preceding month. Economists expected a rise of 0.2%.

Core retail sales, which exclude sales of motor-vehicle related industries, rose 1.6% after remaining flat in April and the increase came in higher than economists' expectations of a 0.5% rise.

The growth in core retail sales, which is the highest since February 2007, was mainly driven by a 2.2% rise in sales from supermarkets and grocery stores and a 12.6% increase in clothing and softgoods retailing. The statistical office said 13 of the 20 core industries showed sales increases in May, while the remaining saw sales declines. At the same time, motor vehicle sales dropped 1.9%, and automotive fuel retailing was down 2.7% in May.

During the month, region sales performance showed a mixed trend, with half of the regions showing increases and the other half declines.

Year-on-year, the overall retail sales dropped 1% in May,while on an unadjusted basis, retail sales declined 2.4%, faster than the 1.7% drop in the previous month.

The statistical office said the trend in the total retail sales has been in general falling since January last year, but has currently flattened. The sales trend continued to decline for both automotive fuel retailing and motor vehicle retailing, but the rate of fall has eased significantly since late 2008, the statistical office said.

Credit card statistics released by the statistical office for June last week showed that the overall credit card spending dropped a seasonally adjusted 0.4% from May. Credit card transactions for the retail industries dropped 1%, while that for the core retailing sector fell 1.2%, despite small increases seen in the non-retail and motor vehicle related industries.

In the meantime, there was some indication that confidence in the economy was rising. A report released by Westpac and McDermott Miller earlier last month showed that the consumer confidence rose to its highest level in 18 months, with the index climbing to 106 in the second quarter from 96 in the preceding quarter.

Confidence among firms also increased, with a net 5.5% of firms expecting business conditions to improve over the next 12 months compared to only 1.9% in May, the latest survey by the National Bank showed. Further, a report from the New Zealand Institute of Economic Research revealed that business sentiment in New Zealand improved in the second quarter, with only a net 25% of companies expecting the business situation to get worse in the coming months compared a net 65% in the first quarter.

At the same time, the latest quarterly survey from the QV.co.nz showed last week that there were improved signs of optimism in the New Zealand housing market, although caution remained. The report said expectations about house price changes over the next year remains negative, but they improved considerably over the last quarter.

The Central Bank in its latest monetary policy meeting kept the interest rate unchanged at 2.5% and said the low OCR and stimulatory fiscal policy were the main sources of support to the New Zealand economy at present.

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