WELLINGTON, Feb 16 (Reuters) — New Zealand retail sales volumes increased at the strongest pace in two and a half years in the December quarter driven by spending on vehicles and parts, and in cafes, bars and restaurants, backing views the central bank should keep interest rates on hold for the foreseeable future.
Sales volumes, which strip out price movements, rose a seasonally adjusted 1.7 in the quarter, against market expectations for a 1.3 percent rise, and an upwardly revised 1.6 percent rise in the previous quarter, official data showed on Monday.
The data was in line with other data pointing to solid economic growth but with little inflation pressure, which will cool notions that the Reserve Bank of New Zealand (RBNZ) might contemplate a cut to its cash rate, as other central banks have done recently to stimulate flagging activity.
“The combination will encourage the Reserve Bank to maintain its on-hold stance for the official cash rate,” said Westpac senior economist Felix Delbruck.
The RBNZ has been on hold at 3.5 percent since last September, and has said a period of stability is the best option. A Reuters poll shows a strong majority backing a resumption of rate rises in the first half of next year.
Market pricing implies a 12 percent chance of a rate cut next month, and 21 basis points of cuts over the next 12 months.
The New Zealand dollar rose to a high of $0.7483 from around $0.7850 before the data. It last traded at $0.7474. Interest rate futures were little changed.
Volumes, which strip out price movements, were driven by a 3.4 percent jump in vehicles sales and servicing, while spending in bars and restaurants increased 3 percent, with solid gains also in clothing and electronic goods and appliances.
Core retail sales volumes, which exclude fuel and motor sales and servicing, rose 1.5 percent.
The seasonally adjusted value of retail sales rose 1.6 percent in the quarter. Sales values were up 4.7 percent on the same quarter a year ago.