The Bank now says economic output will slide 1 per cent in the March quarter figures to be released after the budget, a slightly worse decline than the 0.9 per cent recorded during the global financial crisis.
Retail spending slid 0.5 per cent in March taking the trend rate of growth to just 0.1 per cent. Adjusted for inflation the Bureau of Statistics seasonally-adjusted estimate of the volume of goods sold in the March quarter was no higher than the December quarter.
The zero real spending growth came at a time when the Australian population grew 0.4 per cent.
Annual growth slid to just 0.8 per cent...
Inflation-adjusted spending rose most in a category known as “other” retailing including flowers and antiques climbing 5.6 per cent, followed by shoes (up 3.8 per cent) and pharmaceutical goods (up 1.5 per cent).
Spending fell most in sporting goods, toys,
video games (down 5.3 per cent) and electrical and electronic goods (down 2.9 per cent).
“The March quarter was a wash-out in every sense,” said Westpac economist Matthew Hassan. “Sales were dominated by the impact of severe flooding and Cyclone Yasi.”
“Volumes were flat in the after sliding 0.4 in the December quarter. That is borderline recessionary if you subscribe to the idea that two consecutive quarterly declines constitute something more serious than just a slowdown.”
The Reserve Bank will release its set of forecasts this morning (FRI) and has indicated that it too will be forecasting negative growth in the March quarter, followed by a swift bounceback later in the year. It is has singnaled that it prepared to lift interest rates to control inflation even if economic growth is negative.
Commonwealth Securities economist Savanth Sebastian said he doubted the Bank now would raise rates, saying anyone who had thought so “had better think again”.
“Consumers are not spending. Retailers have been telling us conditions are the weakest since the height of the global financial crisis. Well the data bears it out, in fact department stores have experienced the largest real drop in sales for a decade.”
Shares in Myer slumped 1.6 per cent; shares in David Jones Ltd 1.8 per cent.
The dollar fell to its lowest level in more than a week, sliding from 107.6 to 107.0 US cents.
Published in today's SMH and Age
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