Consumer spending fell through the floor as the economy went into lockdown and is expected to be subdued for the foreseeable future.
Retail sales volumes for the first quarter of the year had their largest fall in eight years, falling a seasonally adjusted 0.7 per cent, excluding the effect of price moves. Sales had been flat in the previous quarter.
Stats NZ says the closing of borders to foreigners started the process, and the effects were exacerbated by the closing of all but essential businesses in the last week of March.
"This hit car yards, takeaways, restaurants, hotels and motels hard, with sales dropping sharply," says Stats NZ retail manager Karen Hicks.
Vehicle sales were hit the hardest, falling 7.5 per cent, followed by hospitality and accommodation, but supermarket and liquor sales surged as consumers bought up large ahead of the lockdown.
Core retail spending, which excluded vehicle related sectors, rose 0.6 per cent.
The spending slump was the biggest quarterly drop since 2012, and partial sales figures for April show spending to be half that of March.
"These falls may continue into the June 2020 quarter, with a record fall in monthly electronic card sales already reported for April, as many businesses went into hibernation because of the Covid-19 lockdown," says Karen.
An economist says the drop was not as bad as had been expected, but consumer spending would be subdued for some time as financially hard pressed households preserve their money.
"New Zealanders are going to be reluctant to get out and spend for some time yet especially with a lot of households facing job losses," says Westpac senior economist Satish Ranchhold.
"There's also a lot of nervousness about the economic climate, and that's going to be a drag on spending levels for some time yet."
Meanwhile, struggling appliance and household retailer, Smiths City confirmed it will close seven stores as it got itself in shape to seal a deal that will see it sold to a private buyer for $60 million.
The stores to be closed are Whangārei, Mount Wellington, Kapiti, Porirua, Lower Hutt, Christchurch Outlet, and Invercargill.
Meanwhile, Australian retail giant Wesfarmers said it would be closing a large number of its discount furniture chain Target stores, with others to be converted into K-Mart stores.
It did not make immediately clear whether its New Zealand branches of either chain would be affected.
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