Biggest drop in spending on record during lockdown, Stats NZ says

Monday, 24 August 2020

Infometrics economists talk about the return to higher alert levels in Auckland.

Retail sales values fell a historic 15 per cent in the June quarter, the biggest drop on record in figures going back 25 years, according to Stats NZ.

Spending on eating out, accommodation away from home, vehicles and fuel all fell sharply in the three months ending June 30 compared with the same time last year.

The drop was only partly offset by strong supermarket and grocery sales.

Retail statistics manager Kathy Hicks said the year-on-year drop was not surprising, considering the Covid-19 restrictions.

Retail was hard hit by the Covid-19 lockdown, says Stats NZ.

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“Non-essential businesses closed temporarily for about half of the quarter during alert levels 4 and 3.”

Food and beverage services were the hardest hit, with a 40 per cent drop or $1.2 billion in sales in the quarter, the largest drop of any industry.

“For a team of 5 million, that is equal to each person spending about $18 a week less on eating out over the June quarter,” Hicks said.

Fuel retailing had the second largest fall, down 35 per cent or $770 million.

The top two biggest falls by dollar value were followed by a drop in motor vehicles and parts retailing, down 22 per cent or $729m; accommodation services, down 44 per cent or $418m; and hardware, building, and garden supplies down 16 per cent, which equated to $350m in sales.

These falls were partly offset by a substantial increase in supermarket and grocery stores sales, up 12 per cent or $615m from last year.

This followed a record rise of 13 per cent, or $665m, in the March quarter.

“Supermarkets and grocery stores were essential services that stayed open during the lockdown, and the strong increase in sales values reflects that,” Hicks said.

Sales values for the non-store and commission-based industry rose 20 per cent to $94m.

Electrical and electronic goods retailing was also up 5.4 per cent to $49m.

“These businesses were able to operate online under lockdown as an essential service,” Hicks said.

“They provided food deliveries and electronic supplies, such as heaters or computer monitors for home office set-ups during lockdown.”

The Auckland region had the largest dollar value fall during the June quarter, down 13 per cent or $1.2b.

Canterbury had the next largest fall in dollar terms, down 17 per cent or $516m.

While the regions with higher population numbers recorded the largest dollar value falls in the June quarter, the drops in the South Island regions were more significant to their economy.

The Otago region, including Dunedin and Queenstown, had the largest fall in percentage terms, down 27 per cent or $343m.

“The big drop in sales for the Otago region in part reflects the significant fall in overseas tourists visiting the Queenstown Lakes region,” Hicks said.

Retail NZ chief executive Greg Harford says new retail sales numbers are unsurprising.

Other regions affected by reduced international and domestic tourism spending were the West Coast, down 22 per cent or $33m; Southland, down 19 per cent or $89m; Nelson, down 18 per cent or $51m; and Tasman, down 18 per cent or $42m.

ASB and ANZ banks said the Stats NZ figures were slightly better than predicted.

ANZ predicted a 17.5 per cent drop in retail sales, while ASB predicted up to a 20 per cent drop in retail sales.

ASB senior economist Mark Smith said the fall in retail volumes looked to have been solely due to the Covid-19 restrictions and the closed border.

While spending had picked up during the post-lockdown period, recent events had dampened the outlook for the rest of the year, Smith said.

“The return to level 3 lockdown in Auckland and level 2 elsewhere will temper the retail recovery and will sorely test the resilience and viability of a number of struggling retail and hospitality operators,” he said.

“Widespread job losses and a non-existent overseas tourism and educational boost will also crimp consumer spending.”

Retail NZ chief executive Greg Harford agreed that the numbers were not surprising.

”Obviously we were locked down for a substantial portion of that period, and it is pretty in line with our numbers that suggest sales were down about 10 per cent over the last five months and were down about 10 per cent overall.”

June was a strong month for many retailers but the massive drop in sales during April and May continued to reverberate across the sector, he said.

The first step towards rebuilding business confidence was to ensure the country did not yo-yo in and out of alert levels, he said.

“Retailers need an environment where customers are confident to spend and where there is support available for those businesses that are really struggling,” Harford said.