Friday, January 08, 2010

A restaurant-led recovery?

Sydneysiders gorged their way to economic health in November, spending an extraordinary 42 per cent more at cafés and restaurants than a year before and an extraordinary 24 per cent more on takeaway food. The same retail figures show spending on footwear up 17 per cent and spending on clothes up 16 per cent.

Total NSW spending grew 11 per cent, way in excess of the national increase of 7 per cent, and the official inflation rate of 1.2 per cent.

"NSW was hit harder than other states and its bouncing back more strongly," said Australian Retailers Association executive director Russell Zimmerman. "The economy is starting to feel better and people are starting to realise there's job security."

Treasurer Eric Roozendaal said NSW consumers were now spending $22.4 million more per day than they did at the depth of the economic crisis...

"These are the green shoots of economic recovery. It's good news for the economy and the state’s retailers."

So strong was the unexpected 1.4 per cent jump in national retail spending in November that the Australian dollar surged half a cent to more than 92 US on increased speculation of a further interest rate rise in February.

"Recall that consumers knew about two interest-rate rises in November. This is the last retail report that the Reserve Bank will see before next month’s meeting," said BT Financial Group economist Chris Caton. "It certainly won’t dissuade the board from raising rates."

ICAP Australia economist Adam Carr said the news "ended the debate about the strength or otherwise of the consumer".

"Arguments were being floated that the absence of cash handouts and rising interest rates would temper spending in late 2009. It hasn’t happened. Consumer spending is strengthening. End of story."

"It makes sense. Rate hikes to date have really been about removing emergency stimulus that is no longer required. Mortgage rates are still low and 100,000 or so jobs were created late last year. What more do you need?"

Mr Zimmerman said despite appearances retail spending was likely to weaken in coming months, making a further interest rate rise unwelcome.

"The first three months are always quiet. There are credit card bills, private school fees and spending on school clothes and equipment. The Reserve Bank needs to watch things very closely and not react too quickly in February just because we've had a good November."

But he said by the middle of the year much lower prices on clothing and shoes should boost boost demand.

"Big tariff cuts came into force on January 1. Goods for Autumn and Winter are coming in now and they'll be cheaper when they go on sale. The high Australian dollar will also keep prices low."

Early indications suggested Christmas spending was strong, with 62 per cent of retailers surveyed in the week before Christmas reporting the same or better conditions than in 2008.

Treasurer Wayne Swan said the news was a tribute to the success of the government's stimulus measures as well as the resilience and confidence of the australian people.

He attacked what he said was a gaffe from Opposition Leader Tony Abbott who told The 7.30 Report on Wednesday that New Zealand has done "just as well it seems as Australia without going into anything like the same level of debt and deficit."

Mr Swan said New Zealand endured five consecutive quarters of recession.

Where we spent

Year to November

Cafes, restaurants up 42%
Takeaway food up 23%
Footwear up 17%
Clothing up 16%
Supermarkets, groceries up 11%
Cosmetics, pharmacies up 10%
Hardware up 8%
Electrical goods up 6%
Liquor up 6%

NSW retail spending, ABS 8501.0

Published in today's SMH and Age

Photo: Rockpool, SMH

Related Posts

. Wind back the stimulus? Where's the love?

. Those stimulus measures, did they work?

. Might we spend even more this Christmas?