Weather, strong dollar harm retailers

Kiwi shoppers had a Christmas hangover with spending on debit and credit cards falling in January - but the hospitality industry provided a glimmer of life.

Statistics New Zealand data released yesterday showed the seasonally-adjusted value of retail electronic card spending dropped 0.5 per cent ($21 million) last month. The decline, which one economist called "surprisingly weak", followed three straight months of increases.

Hospitality NZ president Adam Cunningham said he had hoped for a better January sales-wise for the industry which recorded a 0.7 per cent ($5m) increase, the only retail sector to do so.

"But that is directly linked to weather. If the weather's good the sales go up. But the fact that we've fundamentally held the line is reasonably positive."

Cunningham said hospitality performance was patchy with a steady increase in casual dining but a decrease in top-end a la carte dining outside the main centres.

The apparel sector took a hit with a month-on-month decrease of 2.8 per cent ($8m).

Wellington's Mandatory menswear shop owner Clare Bowden said business owners from smaller centres would often come to the capital in January for some retail therapy.

"We've found that trade a great deal lighter this season. That could possibly be down to their own incomes being down because the Christmas weather was so unsettled."

Another factor may be the strong New Zealand dollar tempting Kiwis to holiday in Australia and Asia, she said.

"You are definitely getting the sense that people are extending their [Christmas] break this year."

Furniture, hardware and appliance retailers also took a body blow with a decrease in card spending of 1.3 per cent ($14m).

Kirkcaldie and Stains managing director John Milford said a successful one-off underwear clearance sale boosted his department store's sales in January.

"If we hadn't have had that I suspect we would probably have mirrored those numbers."

Milford said Wellington retailers were "doing it tough" in a "challenging" environment.

He said the positive local effects of the Canterbury rebuild and the migration of people to Auckland had blinkered some into believing the entire economy was booming.

ASB economist Daniel Smith said the figures did not change his view that consumer spending would grow in the coming year.

"Population growth, an improving labour market, rising house prices and strong consumer confidence should all support consumption."

ANZ senior economist Mark Smith said "reasonably solid retail momentum remains despite retail spending significantly under-shooting market expectations".

Westpac senior economist Felix Delbruck said electronic card spending "was surprisingly weak" but thought it reflected monthly volatility rather than showing a trend.