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New Zealand's economy slips further

NEW Zealand's retail spending fell for a fourth straight quarter, the most prolonged decline on record, and house sales plunged to a 20-year low, suggesting the nation's recession is deepening.

Retail sales, adjusted for inflation, dropped 0.6 percent from the third quarter, when they fell 0.9 percent, the statistics office announced yesterday. House sales slumped 28.5 percent in January from a year earlier to the lowest level since at least 1989, the Real Estate Institute said.

Falling consumer spending suggests that income-tax cuts and lower interest rates failed to steer New Zealand out of a recession that began in the first quarter of last year.

Reserve Bank Governor Alan Bollard has reduced the benchmark rate by 4.75 percentage points since July and will probably cut borrowing costs again next month, economists say.

"Consumers have become increasingly reluctant to spend amid widespread recession fears and heightened anxiety about job security," said Helen Kevans, senior economist at JPMorgan Chase & Co in Sydney.

"The problematic global outlook provides ample scope for the Reserve Bank to ease policy assertively."

New Zealand's dollar dropped from 52.19 US cents to 52.04 cents in early trading after the house sales report was released. The currency has slumped 34 percent against the US dollar in the past year, making it the worst-performing major currency tracked by Bloomberg.

Last month Bollard said that he expected the economy wouldn't start growing until the second half of this year amid a deepening global recession. Lower interest rates should bolster demand provided companies and households do not unnecessarily cut their spending, he said.

New Zealanders are "behaving appropriately, cautiously but not putting up the shutters," Bollard told reporters in Wellington yesterday.

"Both in the household sector and the business sector, people are still going ahead with stuff and looking for bargains, but they are trying not to do anything risky."

Retail sales were led lower by spending at car dealers, which declined for the seventh straight quarter, the statistics office said.


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