Retail sales – missing ingredient in the RBA stew

Michael Pascoe
February 6, 2013

It’s taken just 21 hours to make yesterday’s Reserve Bank decision to sit pat look a little “brave” and not the sure thing market economists were tipping.

December retail sales were an important missing ingredient in the RBA lunch stew, making an argument for RBA board meetings to be held on the second Friday rather than the first Tuesday of the month.

If the RBA was relying on its industry liaison for a reading on the state of Australian shopping, the advice must have been the same as what retailers have told media, that Christmas was a little better than last year but nothing flash. And looking at the December-on-December trend Australian Bureau of Statistics trend series, that was the case: retail sales were up just 2.5 per cent on December 2011.

But the trend series shows the value of retail sales effectively flatlined over the last four months of 2012. Looking at the year in total, retail sales growth was modest but reasonable in the first half of the year, wobbled in July, fell in August and stayed on the mat thereafter. December was actually negative by 0.1 per cent.

The RBA governor’s brief statement after yesterday’s meeting made no mention of retail, the closest thing being that: “Present indications are that moderate growth in private consumption spending is occurring”.

That’s supported by record car sales and overseas travel, but the consumer spending isn’t doing any growing in the shops.
Other ABS figures out today show a record 908,600 Australians left the country for a short trip in December, the first time the 900,000 mark has been broken – over the past five years, the numbers of us holidaying abroad has soared by more than 50 per cent. In-bound tourism continues to run at record highs, never mind our strong dollar, with a rapidly changing composition with tourism from non-Japan Asia exploding.

What makes today’s retail figures more intriguing is that while just about everyone’s shouting about the seasonally adjusted number (down 0.2 per cent) and only the occasional oddball concentrates on the trend series, totally forgotten is the original numbers, the raw unadjusted dollars counted.

On that score, there’s the $5 billion leap from November to December that you’d expect with the Christmas blow out, but December 2012 was up just 0.8 per cent – $218 million – on December 2011.

The structural changes in retail, including how much stuff we’re bringing back with us from overseas rather than buy at home, cloud the picture, but there’s enough in today’s statistics to make the RBA concerned about whether slowly softer monetary policy is working. Friday’s quarterly statement on monetary policy should be particularly interesting reading.

With January labour force statistics to come tomorrow, the RBA might well think Friday is a much better day for lunching.
Michael Pascoe is a BusinessDay contributing editor

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