Plunging used car sales dragged retail spending for May down 1.2 per cent and more recent used car sales data suggests the pressure on total retail sales will continue.

Registrations of used imports fell 25 per cent in May compared with May 2007. Figures for June, when fuel prices increased further, show a 30 per cent fall on June 2007.

New car registrations for May were down 11 per cent on a year earlier, but rose 6 per cent in June, bringing total registrations for the first six months of 2008 to 3 per cent up on the previous period.

The 1.2 per cent, or $69 million, drop in total retail spending compared with April was the biggest fall since February 2004.

ASB chief economist Nick Tuffley was surprised at the depth of decline in May’s vehicle sales and expected the market to remain soft for some months.

Market expectations had been for a 0.2 per cent rise in overall used car sales.

“Since the start of June, we’ve seen petrol prices rise another 18 cents so a lot of that budgetary pressure has cranked up another notch,” Mr Tuffley said.

Statistics New Zealand said core retail sales, excluding the motor vehicle sector, had risen 0.7 per cent on April on the back of a 3 per cent rise in supermarket sales and a 3.2 per cent rise in fuel sales.

Retail in Wellington was down 0.9 per cent on April, in Canterbury down 3.5 per cent, in Waikato 2.8 per cent and in Auckland 1.4 per cent.

After motor vehicles, furniture and floor covering stores had the largest fall, down 15.6 per cent.

Appliance retailing rose 1.5 per cent on April. Noel Leeming’s chief executive, Andrew Dutkiewicz, said the downturn was being felt across every category in his stores.

“We still have a lot of people in our stores.

“The issue is a lot are coming in and kicking the tyres and probably just delaying purchases.”

Staff in departments where auto sales were down were not being replaced and the company was starting to cut back on advertising spending.

In recent weeks, Hallenstein Glassons, The Warehouse and Briscoe Group have all cut their earnings forecasts for the year.

Most economists said yesterday’s grim retail sales figures alone were not enough to prompt the Reserve Bank to cut the official cash rate during its review this month.