Consumer spending shows signs of drop

Press, 31 May 1985, Page 5

Consumer spending shows signs of drop

Indications of a drop in consumer spending are already apparent, according to the general manager of Smiths City Market. Ltd, Mr Peter Leeming. yesterday. Mr Leeming was responding to a warning this week by the chief executive of Brierley Investments. Mr Bruce Hancox. to prepare for a 10 to 20 per cent downturn in domestic demand.

Sales in the last two months had been buoyant throughout New Zealand but a significant tightening was being experienced by major retailers, said Mr Leeming. "Happily, we are not experiencing it ourselves but I have been assured by many other retailers throughout

the country that sales have become tighter than, say, two months ago." he said. Inflation and high interest rates on borrowing were probably the main reasons. A “pre-goods and services tax surge” was expected and this could make some compensation for what retailers were experiencing at the moment, he suggested.

GST. to be introduced in April. 1986, was. in principle. desirable and necessary provided no exemptions were made. Mr Leeming said. "If the Government sticks to its undertaking to pass on benefits to those sectors of the community rnosi in need, its (GST) impact on the consumer market should

be relatively minimal." he said. Smiths City Market, a Christchurch-based firm, has the biggest chain of retail outlets in the South Island with 29 stores specialising in household goods. The president of the Can-terbury-Westland Retailers' Association. Mr John Suckling. said retail trading was likely to be buoyant leading up to the introduction of GST. People would know that prices were to increase on a certain day. The association and the Retailers' Federation supported GST as long as there was one rate and no exemptions. he said.

This matter and retail sales would be discussed further at a meeting of the association next week. Mr Suckling said.

The general manager of L. V. Martin and Son, Mr Alvin Relph, said business was fairly buoyant and he expected a fairly good year before GST was introduced next April.

The only area where he agreed with Brierley's warning of a downturn in domestic demand was that people did not have the dollars in hand because they had not yet seen a reduction in personal income tax. That was supposed to be the benefit of GST.

The lack of dollars would create more demand for credit or it would have a dampening effect on demand by people who did not have the money to spend.

However, New Zealanders were fairly resourceful and would use credit to buy now and pay later on goods which would increase substantially in price with GST. Mr Relph considered retailing would have a reasonably good year but things would slow down after GST while people got used to higher prices, particularly on goods which did not now incur sales tax.

His company would not be too badly because whiteware (such as washing machines) would

increase only minimally in price with GST. and brownware (television sets) should hardly be affected as it already incurred high sales tax. That was only conjecture, however, said Mr Relph. The company was trying to reduce stock levels, though not to the point where it could not meet demand, because of high interest rates for borrowing to carry the stock. Mr Relph said.

The chief executive of the Motor-Vehicle Dealers' Institute. Mr Colin Stone, said he could not see any bad signs for the retail side of the business. Sales of new cars were

down this year but that was because last year people had brought forward their buying as a result of devaluation.

The year ended with about 98.000 new cars sold, compared with 76,000 in 1983. Mr Denford McDonald, of the Motor-Vehicle Manufacturers' Association, said there was no indication at a meeting of manufacturers last week that anyone saw any problems. No-one saw any reason to cut back suddenly and the forecast was still for 82.000 new cars to be built and imported this year. New car sales had continued to vrease each month tins vear. he said.