Thursday, 14 August 2014

Behind the retail sales numbers

This morning's retail sales statistics made the headlines for the strong overall growth in spending - up 1.2% in real terms during the quarter, and up 3.6% on a year ago. As I've noted before, I think we're just past our peak rate of economic growth for this economic cycle, but even if we're easing off a little, on this showing things are still running along at a pretty robust rate.
Behind the big number there were quite a few interesting patterns. The total volume of retail sales was up 3.6% on a year ago, while the total value of retail sales was up only 3.8%, which implies that prices in the shops went up by only 0.2% over the past year. With people's incomes up anywhere from 1.7% to 2.5% (a guide to the different estimates is here), but prices in the shops broadly stable, their purchasing power has got a sizeable boost.
One possibility, as we get nearer September 20 and the voting booths, is that households might be a bit happier with the state of the economy than some of the numbers would lead you to believe. Yes, the overall cost of living in the year to June was up 1.6%, thanks to electricity, the housing market, and central and local government charges, but on the other hand every time you go into Harvey Norman or Noel Leeming, your money goes further than it did before.
And households have certainly noticed. Prices for electrical and electronic equipment are 6.7% lower than a year ago, and shoppers have responded in a big way: the quantity of electrical stuff bought over the past year is up 13.8% (he said at the keyboard of his new Dell laptop).
Some of this is technological progress as TVs and cameras and phones continue to plummet in price, but the rest is is obviously down to the high Kiwi dollar. Cars have been another big beneficiary (down 1.5% in price on a year ago, which has meant that 8.6% more cars have been driven off the dealers' forecourts), and, I'd guess from those sharp European wine offers I keep getting (and accepting), liquor too (down 2.2% in price, up 5.3% in quantity). The high dollar won't last forever, but while it's there we seem to be taking full advantage of it.
On the downside, some of our domestic sectors keep spitting out price increases. Accommodation, for example: prices up 2.7% over the past year. I can partly understand it - if you're in the accommodation trade, I suspect the rates, the electricity, and the wage bills are your big outgoings, and they've all been rattling along - but I also think it's symptomatic of quite a few of our domestic industries still living in a world where you take out last year's rate card and add 3% to it.

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