Australia | Feb 18 2009
By Chris Shaw
The market had been expecting a 1.0% increase in Australian retail sales volumes for the December quarter but the result was a gain of 0.8%, leading ANZ Bank senior economist Katie Dean to suggest the Federal Government’s initial stimulus package didn’t do quite as much as expected in driving consumer spending.
As Westpac points out, the result shows a split between the various categories, with food, household goods and other retailing all rising solidly, but clothing, cafes and restaurants all posting weaker results. Deans adds while the 1.6% increase in nominal retail sales was good, volumes were impacted by higher prices, which suggests retailers didn’t discount as heavily in the December quarter as might have been anticipated.
Commonwealth Bank economist James McIntyre agrees, pointing out while retail prices cuts to stimulate sales were evident, these were offset by increases in food and takeaway prices.
TD Securities senior strategist Joshua Williamson sums up the result by noting the sectors that are the important barometers of the Australian economy such as department store sales were weak, which confirms Australian consumers are struggling at present.
According to Dean, consumer spending could fall significantly in the March quarter given consumers are increasingly uncertain as to their employment outlook, which in turn suggests there is scope GDP growth could fall short of the Reserve Bank of Australia’s (RBA) forecast of a flat outcome for the period.
Having previously forecast a flat outcome itself, ANZ is now likely to revise down its growth numbers and Westpac agrees today’s data imply an increased risk to growth for the December quarter. The quarterly result will be released early in March and the bank expects it will be negative.
Neither McIntyre nor Williamson agree GDP will contract in the December quarter, but Williamson does take the view while the latest stimulus package from the Government appears large today’s data suggest more will need to be done to keep the economy from slipping into a recession. ANZ’s view is further cuts to official interest rates will come as early as March as today’s data don’t support a pause in the easing cycle at present.