10 October 2006
Auckland, 10 October 2006 – Despite subdued consumer outlook, New Zealand is expected to see sturdy growth in retail sales for the remainder of 2006, according to the latest MasterIndex™ of Retail forecast released by MasterCard Worldwide.
The survey, which is conducted twice a year, is a short-term forecast of retail sales growth. The latest survey reveals New Zealand retail sales are expected to grow by 4.6% year-on-year in the second half of 2006 to reach $17.54 billion in total sales value, slightly down on the first quarter which showed a robust year-on-year growth of 4.92%.
Recent years have witnessed strong growth in household consumption driven by the ability of households to withdraw equity from the rising value of their houses and outstripping income growth, from wage and employment growth,” said Dr Yuwa Hedrick-Wong, economic advisor to MasterCard Worldwide in Asia/Pacific.
“However, rising oil prices, higher mortgage rates, slowing growth in housing prices and lower immigrant demand for housing began to dampen household spending growth in late 2005,” he said.
This growth comes despite projections that real GDP growth will further slow down in 2006 to 1.4%, a further drop from 2005 when domestic demand slowed to 2.2% from 4.4% in 2004.
“The consumer price index (CPI) is projected to peak at 4% by the end of this year pushed by imported inflation from a weak New Zealand dollar, high oil prices and follow on inflationary pressure from last year’s domestic demand strength. This has prompted the reserve bank to maintain the official cash rate at the 7.25% record high with no indication of easing for the rest of the year” (attribution???).
“Employment growth is also expected to slow again this year to 2.6%, from 3.1% in 2004 and 3.4% in 2005, while wage growth continues to remain strong at 3% (from 2.5% in 2005) as past labor market tightness continues to feed through to wage settlements,” said Dr Hedrick-Wong.
The MasterIndex of Retail’s forecast for the second half of 2006 is shown in the table below.
(*forecast excludes hospitality, catering and auto sales)
(** forecast excludes hospitality and catering, includes auto sales)
Conducted twice a year in June and December, the MasterIndex of Retail was launched in June 2003 by MasterCard as part of its knowledge leadership initiatives in Asia/Pacific. Combining 10 years of retail sales data , factoring in the secular trend of growth of the retail industry, and using the MasterIndexTM of Consumer Confidence as an independent variable , it provides six-month forecasts of retail sales growth in 12 markets: Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand.It is among the MasterCard MasterIndex suite of research products; the others include:
 Based on official government statistics released in each market.
 Based on detailed analysis, it is determined that the five dimensions of the MasterIndex of Consumer Confidence have different weights in affecting the outcome, which are in turn distinct for each of the Asia/Pacific markets.