Friday, May 02, 2008

You are paying more, buying less

TD Securities unpacks today's retail sales figures.

They are not what they seem.

"Recorded retail sales rose by 0.5% in March, ahead of expectations for a 0.3% increase. BUT, excluding food (which most likely rose from higher prices) retail sales actually fell by 0.3%.

All but one other category of expenditure fell in the month. In particular, department store sales fell by 0.7% to be only 0.2% up on the level of one year ago.

As calculated by TD Securities, discretionary expenditure fell by a very strong 3.0% in March.

Higher interest rates and costs for staple items are forcing highly leveraged consumers to reorganise spending priorities and cutting expenditure on discretionary items."

Want proof that increases in the cost of food are stratospheric?

Below is my account of the price of food in the ACT:

Canberra grocery prices are increasing far faster than the official inflation rate.

Officially, Australia's inflation rate is 4.2 per cent, but a detailed breakdown of Canberra grocery prices released yesterday by the Bureau of Statistics points to far faster price increases.

Some but not all are attributable to climbing international food prices.

The prices, collected by the bureau's "shadow shoppers" who regularly visit Canberra supermarkets, point to a 9 per cent rise in the price of bread during the last year, a 15 per cent rise in the price of butter, and a 12 per cent rise in the price of baked beans.

In the March quarter last year, a 650-gram sliced white loaf of bread cost $3.22. By the March quarter this year, it had climbed to $3.52. In the same period the price of 500 grams of butter climbed from $3.24 to $3.74 and the price of a 420-gram can of baked beans climbed from $1.37 to $1.54.

Other staples increased just as strongly. The price of milk shot up 14 per cent, the price of biscuits 10 per cent, the price of eggs 6 per cent, and the price of tomato sauce 7 per cent.

The prices of fruit and vegetables typically increased even faster. Potatoes and tomatoes increased in price by 30 per cent between the two March quarters, the price of onions by 19 per cent and the price of carrots by 10 per cent.

Bananas moved noticeably against the trend, falling in price by 5 per cent.

Meat was generally cheaper, with the price of a kilo of roast beef sliding from $13.04 to $12.29 and the price of a kilo of pork chops falling from $14.86 to $14.27.

Lamb was noticeably more expensive with the price of a kilo of loin chops jumping from $15.83 to $17.22.

Surprisingly amid talk of a world-wide food shortage, the prices of a number of a basic foods changed little or fell. The price of a two kilo bag of self-raising flour slid from $4.36 to $4.04 and the price of two kilos of white sugar fell from $2.40 to $2.14.

The bureau said its sugar price represented an average of brand-name and generic brand prices.

The most extreme price jump, outside those for fruit and vegetables, was in the price of baby food. A 120-gram can jumped from 88c in the 2007 March quarter to $1.15 this year an increase of 30 per cent.

The bureau cautioned in presenting the figures that some of the changes could be explained by differences in the quality of items actually priced during each period and may not represent pure price movements.

It releases the figures each quarter to enable price comparisons between capital cities.

They suggest that our potatoes and carrots are the most expensive in the nation, as is our baked beans and toilet paper.

Our price of petrol was more expensive than in any capital other than Darwin or Hobart during the March quarter, at $1.41 per unleaded litre, a full 10c above the Brisbane price of $1.31.

Australia's official inflation rate is based on a much wider range of prices