Friday, December 03, 2010

Blue Christmas? Saving is nice until shoppers do it.

Retailers are bracing themselves for a blue Christmas after a shocking set of figures showing consumers were winding back spending even before the November interest rate hikes.

October retail trade figures show spending down 1.1 per cent in the month led by a 1.8 per cent dive in NSW.

In the year to October NSW retail spending climbed at a trend rate of just 2.2 per cent. By contrast employment grew 3.1 per cent and consumer prices 2.6 per cent, implying the amount spent per worker fell as did the amount of physical goods bought.

"It's reasonably alarming," said National Retailers Association deputy director Jennifer Cromarty. "We didn't expect a fall. We are not in any form of recovery at all."

The October retail figures build on the September quarter national accounts released Wednesday which show a near-record high proportion of household income was being saved rather than spent.

Savagely hit in October were spending at NSW caf├ęs and restaurants which fell 9 per cent... spending on takeaway food which fell 3 per cent, spending on clothing which fell 6 per cent and spending on shoes which dived 21 per cent.

"It looks as if consumers were bracing themselves for rate rises in October even though they didn't get one," said Access Economics director Chris Richardson.

"Saving has become the new black".

Ms Cromarty said 60 per cent of the retailers surveyed by the Association expect a worse Christmas than last year. Most are defying tradition by offering specials before Christmas rather waiting until Boxing Day.

"They have already ordered stock for Christmas so they can't cut back, but they can decide to hire fewer casuals," she said. "That's what will happen unless things pick up in November.

The outlook for November is bad. The month began with a double interest rate hike adding $88 extra per month to the cost of repaying a $300,000 Commonwealth Bank mortgage.

"Energy prices are up as well," said Mr Richardson. "Although we spending less in shopping malls we are spending more on utility bills, more on mortgages and more on cars. Lower tariffs and the high dollar mean it has never been cheaper to buy cars. That's where much of our money has been going."

"Wage growth has been low, and in the last month we've made little more from either property or share market prices."

Treasurer Wayne Swan said it was "not surprising consumers are being a little bit more cautious with their spending given the global economic conditions we have been seeing".

"Our economic fundamentals remain strong, underpinned by envied job creation, a rapid return to surplus and a huge investment pipeline."

Mr Richardson said weak consumer spending would not derail the economic recovery.

"It'll come from business spending - and not from retail or tourist businesses either. The resources sector wants to spend half as much again next year as it did last year, and that was a lot. The Treasury has only factored in about half of it. The working assumption is they just won't be able to push the money out of the door as fast as they are planning."

Australia's trade surplus jumped from $1.8 billion to $2.6 billion in October led by strong increases in exports of gold and wheat as exports of iron ore and coal fell.


NSW Spending, October

Liquor: down 2%
Clothing: down 6%
Shoes: down 21%
Department stores: down 2%
Takeaways: down 3%
Restaurants: down 9%
Books, magazines: up 7%
Pharmaceuticals, cosmetics: up 4%

ABS 8501.0, Seasonally adjusted

Published in today's SMH and Age

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8501.0 5368.0