Rate cuts fail to inspire Xmas spendathon: data
Consumers remained cautious over the critical Christmas shopping period, according to new credit card data. Photo: Gabriele Charotte
The disappointing news for Australian retailers looks set to continue, with the latest credit card data over the holiday period showing that spending rose only modestly from the year before.
The analysis, of more than three million Commonwealth Bank cardholders' transactions, came as Westpac said its consumer sentiment index rose just 0.6 per cent in January from the month before.
Commonwealth Bank retail analysts said their internal data on the 11 weeks up to January 4 showed that consumers remained relatively cautious despite the Reserve Bank's interest rate cuts, boosting their Christmas spend by only 4.2 per cent on a year earlier.
"Given this is nominal spending rather that real spending (inflation adjusted), it highlights the tough environment faced by the retail sector," CBA said in a research note.
Lack of discretionary spending
CBA said the data showed consumers were spending more on necessities but barely more on discretionary items, with nominal sales only rising by 1.5 per cent.
At the same time, spending on food and liquor rose by 10.8 per cent compared to the year before.
"If inflation was taken into account it would suggest that real discretionary spending actually went backwards during Christmas 2012 compared with a year ago," CBA said.
"And given the buzz and interest around Christmas retail activity, the lack of discretionary spending really speaks volumes about how tough the retail sector is doing it at present, and that is despite a healthy period of interest rate cuts."
CBA said the data from debit and credit card transactions included online spending. With internet sales continuing to eat into the bricks and mortar retailers, the data could be overstating their performance, the bank’s economists added.
New vehicles sales rise
In contrast, new vehicle sales rose 2.2 per cent in December to a seasonally adjusted 98,264, figures from the Bureau of Statistics released today showed.
Sales of sports utility vehicles soared 5.8 per cent in December to 26,502, marking a 17 per cent growth for the year.
‘‘The figures suggest that Australians are taking advantage of a strong dollar, which decreases the cost of imported cars,’’ Commonwealth Bank economists Gareth Aird and Diana Mousina said.
Consumers not reacting strongly to rate cuts
Westpac said the case for further interest rate cuts was strengthened following the January results of its Westpac-Melbourne Institute index of consumer sentiment.
"It remains disappointing that despite a total of 175 basis points' of cuts from the Reserve Bank since October 2011, the index is only 3.5 per cent about its level at that time," the bank's chief economist Bill Evans said.
Other factors that were expected to have improved consumer confidence, such as the rising Australian share market, positive global economic news and a falling unemployment rate for November, "had little effect", Mr Evans said in his research note.
Mr Evans said there was a clear case for at least one more interest rate cut in the current easing cycle. But Westpac tipped the RBA to act in March rather than at its next meeting on February 5.
UBS economists Scott Haslem and George Tharenou said the Reserve Bank’s cuts modestly boosted consumer sentiment to an average level, as compared to previous easing cycles that led to sharper rebounds.
‘‘Nonetheless, the level of sentiment still implies a decent pace of consumption growth. For the RBA, the upcoming [fourth quarter consumer price index ] remains key for their February decision,’’ the economists said.
Economists estimate that the unemployment rate will rise to 5.4 per cent from its current level of 5.2 per cent when the Bureau of Statistics releases its labour force survey tomorrow.
On Monday, economic data released by ANZ showed job ads dropped by 3.8 per cent in November, falling for the 10th-straight month.
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