Chris Zappone
February 6, 2012
The Age
Australian shoppers kept their cash in their pockets at Christmas in the latest sign that the national economy is cooling off.
Retail sales posted a surprise 0.1 per cent fall in the crucial month of December, the first drop in six months,according to new figures released by the Australian Bureau of Statistics.
Analysts expected a 0.2 per cent rise for the month, but struggling retailers endured a softer-than-predicted end to the year, traditionally the most important period for the retail sector. Sales in November were revised up to a 0.1 per cent gain from the originally reported flat result.
The weak Christmas numbers bolster the case for a rate cut at tomorrow’s RBA board meeting, adding to recent indications that the Australian economy is slowing down.
Spending at cafes and restaurants fell 1.8 per cent, while food retailers saw a 0.7 per cent slide. Clothing and footwear stores enjoyed a 3.5 per cent rise and spending at department stores gained 1.1 per cent.
Retail sales also disappointed on a quarterly basis. With inflation stripped out, sales rose 0.4 per cent in the final three months of 2011. Analysts expected a 0.6 per cent increase in the fourth quarter.
The Australian dollar lost ground after the release of weaker-than-expected sales data. The currency was at $US1.0748 just before the data’s release, but fell to $US1.0728 immediately afterwards. It quickly regained the losses.
‘Disappointing’
AMP Senior Australian Economist Bob Cunneen said the December numbers were “very soft” and closed off last year “on disappointing terms”.
“It definitely favours another rate cut by the RBA. The RBA should be able to see consumers are very subdued, which partly reflects global concerns such as Europe but also reflects (the fact that the) labour market is softening here,” he said.
Also, Mr Cunneen said house prices were moving lower and the sharemarket slumped over 2011, both of which had undercut consumer confidence.
Consumer caution
Bank of Melbourne chief economist Besa Deda said consumers were still hesitant to spend “given the weaker prospect for global growth and the softening of employment growth at home”.
Ms Deda said increased discounting likely helped lift sales of clothing and footwear by 3.5 per cent in the month and helped push department store sales higher.
“Cold weather might have contributed to weakness in the sense that the rain and cooler weather might have kept consumers indoors more,” said Ms Deda.
Improvement ahead
But others expect retail sales to improve when the rate cuts from November and December last year wash through to consumers. Commonwealth Bank economist James McIntyre said he expected the retail trade data to improve in the first half of 2012.
‘‘We would have expected it to have lifted a bit as it has done the last two times the RBA cut rates,’’ Mr McIntyre said.
‘‘If the rebound in retail does not come in the next month or two don’t be surprised that six months down the track from that November cut (May) we should be seeing some relatively better outcomes.’’
Retail sales, a key indicator of the strength of the domestic economy, have been under a cloud for most of last year.
The retail sector has been squeezed by online competition for overseas, with consumers using the supercharged strength of the Australian dollar to bypass local shops. Bricks and mortar retailers also face higher rent and labour costs than their peers in the US and UK, whom they are now competing against.
Uncertainty about the health of the economy has also weighed on the confidence of consumers who, like their American and British counterparts, have begun to spend less and save more.
Domestic online retail sales are included in the overall retail sales figure but are not broken out as a seperate category. The ABS data does not include online purchases made from overseas websites.
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