Thursday, December 16, 2010

A turkey of a Christmas?

No wonder shopkeepers can't figure us out. The latest consumer confidence survey shows us going into Christmas more convinced than in years that "now is the right time to buy a major household item" but at the same time less keen than in years to do it.

An near-record 64 per cent of us agreed that now was a good time to buy, a result bettered only once in the past decade. But just 3.7 per cent of us felt that spending was the best use for savings, the second-weakest result on record.

By contrast 30 per cent us felt the best place for savings was in a bank and 22 per cent felt it was paying down debt, both totals only significantly exceeded at the height of the economic crisis.

"Australian consumers have turned conservative," said CommSec economist Savanth Sebastinan.

"Interest rates need to remain on hold for an extended time before they'll be tempted to part with their cash... This will only make things more difficult for retailers. They will need to discount to generate interest."

The Westpac-Melbourne Institute survey found awareness of news about the Australian dollar doubled between September and December, perhaps providing a clue as to why consumers increasingly thought it was a good time to buy.

Awareness of news about interest rates also almost doubled, perhaps providing a clue about the reasons for renewed consumer caution.

Labor voters are far more optimistic than Coalition voters with positive responses to the survey questions exceeding negative responses by a wide margin. Among Coalition voters positive and negative responses were evenly balanced.

The overall consumer confidence index held firm in December, advancing by a fraction of a point.

Within the total there was a sharp drop in the proportion of people expecting better economic conditions over the next 5 years balanced by an increase in those reporting improved family finances over the past year.

In the past year retail spending as climbed at a trend rate of 2.7 per cent - merely in line with inflation and well below the 3.7 per cent rate of employment growth - implying the amount spent per worker has been falling.

Access economics this week forecast a "turkey of a Christmas,'' predicting the November double interest rate hike would hit sales retail directly and also indirectly by further limiting home building, one of the key drivers for major household purchases.

Published in today's SMH and Age

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