The New Zealand Reserve Bank has cut the Official Cash Rate by 50 basis points to 4.25 per cent this week, with peak body Retail NZ calling it welcome news for retailers during one of the busiest weeks of the year.
Retail NZ added it is hopeful that the OCR announcement will improve consumer confidence in the run-up to Christmas, saying a rise in confidence will help retailers, which have been suffering a continued downturn in sales.
Earlier this week, Stats NZ’s latest Retail Trade Survey showed that core retail sales fell 1.7 per cent compared to the same quarter of 2023. Total retail sales (including motor vehicles and parts, and fuel) were down 2.8 per cent.
This aligns with Retail NZ’s recent Retail Radar quarterly survey which found that 70 per cent of survey respondents did not meet their sales targets in the July-September quarter.
“A turnaround in the economy can't come soon enough for the retail sector, so we are delighted at the Reserve Bank’s decision to cut the OCR by 50 basis points to 4.25 per cent,” Retail NZ CEO Carolyn Young said.
“With Black Friday sales already underway, this will be welcome news for retailers. Strong pre-Christmas sales are critical to retailers meeting their annual sales targets.”
Alongside struggling sales, New Zealand consumer confidence dropped by 3.9 points in October to 91.2, according to ANZ and Roy Morgan, with the downturn following three months of improvement. Both the current and future conditions indices declined.
Inflation expectations were unchanged at 3.8 per cent in October and expected house price inflation lifted from 3.2 per cent to 3.4 per cent.
“After three months of improvement, ANZ-Roy Morgan New Zealand Consumer Confidence slipped in October,” Roy Morgan and ANZ commented last month. “While interest rate relief is on the horizon – and indeed the month of October saw the RBNZ up the ante and deliver an outsized 50bp OCR cut, with another 50bp cut looking likely in November – that will take time to flow through.
“Around 65 per cent of mortgage holders will refix in the next 12 months, but the wait certainly isn’t without its challenges as labour market conditions continue to deteriorate.”