Australia | Oct 16 2012
– Australian consumers expected to limit non-essential spending
– Dun and Bradstreet survey shows households remain cautious
– Increases the risk Christmas period retail sales fall short of expectations
– Implies RBA will be under pressure to further cut interest rates
By Chris Shaw
Ongoing concerns with respect to financial security suggest Australians will curb non-essential spending leading into Christmas according to a recent survey from Dun and Bradstreet.
The group's latest Consumer Credit Expectations Survey suggests half of Australian households are less likely to spend on non-essential items in coming months, while 29% are now more inclined to save than was the case 12 months ago. The survey also indicated 56% of Australians have concerns with respect to their personal financial situation.
According to the Dun and Bradstreet survey, credit usage should fall in coming months, as 37% of households are less likely to use a credit card to pay for non-essential items over the Christmas period when compared to the same period last year. Only 16% of those surveyed intend to apply for a new credit product or limit increase.
Danielle Woods, Dun and Bradstreet general manager, suggests the conservative outlook of consumers is a positive for household balance sheets but could significantly impact in a negative way of businesses relying on a pick up in sales at Christmas.
The survey showed older Australians are most conservative with respect to holiday spending, as 53% of those 50-64 years old are less inclined to spend on non-essentials that was the case a year ago. This compares to 51% of those aged 35-49 being reluctant to spend over Christmas according to the latest survey.
Among the 35-49 year olds, the survey shows 40% will use credit to cover expenses they couldn't afford otherwise, up from 35% a year ago. In this demographic 60% of those surveyed are concerned about their financial situation, as 35% would last only one month on their current savings without full-time employment.
In comparison, for those in the 50-64 year old demographic around 25% expect to need to use credit to cover expenses, while 60% are concerned about their financial position. Just under 30% would only be able to get by for one month using current savings.
In contrast with the sentiment of consumers, the most recent Dun and Bradstreet National Business Expectations Survey suggests a buoyant outlook for retailers over the Christmas period. This suggests there is a risk the Christmas sales outcome for retailers may fall short of expectations.
For Stephen Koukoulas, Dun and Brasstreet's economic advisor, the fact consumers are reluctant to spend on non-essentials despite cuts to interest rates implies other factors are having an impact. Koukoulas suggests a possible negative factor is a lack of confidence, this given a stalling in employment growth and weak asset price growth for housing and the share market.
This implies further pressure on the RBA to continue to cut interest rates, Koukoulas noting data from the latest Consumer Credit Expectations Survey supports the case for further reductions in interest rates.
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