NZ Retail Sales Contraction Sparks Rate Cut Speculation

New Zealand's retail sales contracted by 0.5% in Q2 2025, falling short of market expectations of a 0.1% increase. This decline marks persistent weakness in consumer spending, which drives about 60% of the country's GDP.

The seasonally adjusted figures, released by Stats NZ, cover the three months to June 30, 2025. The contraction follows a modest 0.2% rise in Q1, indicating that the rebound was short-lived. Core retail sales, excluding fuel and vehicle-related spending, also fell by 0.4% over the quarter.

Economists at major Australian banks have noted that the weak retail figures increase the likelihood of an RBNZ rate cut in October. However, the central bank remains cautious, as domestic inflation pressures are still above the target range.