Retail sales for the March 2025 quarter released last Friday were much stronger than expected. Consensus had settled on a flat print over the quarter, and instead we saw retail volumes lift 0.8% over Q1. Compared to last year, volumes were up 0.7%. Overall, the strength in retail sales was fairly broad-based. 10 of the 15 measured industries were up over the quarter, and each of the 16 Kiwi regions posted higher seasonally adjusted values compared to the end of last year.
Some areas of particular strength were evident across pharmaceuticals (up 3.7%), clothing (up 3.2%), motor vehicles and parts (up 3.1%), and accommodation (up 2.9%). However big ticket items, from furniture to electronics, and anything “around the house DIY” continues to lack strength. And shows households are still prioritising essentials. A lower rate environment, is likely adding some support to household spending, but broader headwinds, primarily the soft labour market and continued weakness in housing, are clearly still dampening consumer appetite. Nevertheless, the stronger than expected print adds a bit of upside risk to Q1’s upcoming GDP print. And, like the broader economy, we continue to expect a continual recovery across the retail sector throughout the second half of the year helped by real income growth, lower interest rates, and an eventual recovery in the housing market.
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