Surprise drop in retail sales as rate cuts fizzle
Consumers have cut spending on household goods - but not on eating out.
Retail sales have posted a surprise drop as consumers cut back on spending on household goods, putting pressure on the dollar - and the Reserve Bank to lower rates again.
Retail sales fell 0.1 per cent in November, disappointing economists' expectations for a rise of 0.3 per cent economists expected for the month and following a flat result in October.
Retail trade fell to a seasonally adjusted $21.533 billion, compared to a downwardly revised $21.547 billion in October, data from the Bureau of Statistics showed.
The Australian dollar fell below $US1.05 on the news, slipping more than a quarter of a cent to $US1.0491.
AMP Capital senior economist Bob Cunneen said the weak results would keep the pressure on the RBA to consider further interest rate cuts.
‘‘The November result is disappointingly soft,’’ Mr Cunneen said. ‘‘For the last two months - October and November - there was basically flat retail sales, so the Reserve Bank’s interest rate cut in October has not had any positive impact on the consumer in terms of the willingness to spend.
‘‘Then again, there is a lag where interest rate cuts take time to have an impact on retail spending, and the Reserve Bank cut again in December, so that will eventually come through.’’
The release followed the Housing Industry Association’s report on new home sales, which rose 4.7 per cent in November and was led by the sale of detached houses.
The HIA report said sales of detached homes grew by 7.7 per cent as multi-units dropped by 6.9 per cent.
More monetary stimulus needed?
ANZ senior economist Riki Polygenis said the data, coupled with modest credit growth, meant further monetary policy stimulus would be needed to counter sluggish growth in the non-farm economy this year.
“These data continue to suggest that Australian consumers remain cautious and so far have responded little to interest rate cuts through 2012,” Ms Polygenis said in a research note.
ANZ has forecast four more interest rate cuts this year to take the RBA cash rate down to 2 per cent.
Financial markets' expectations of an RBA rate cut in February rose marginally from 36 to 38 per cent following the data release, Credit Suisse data showed.
Less for clothing, more for restaurants
Spending on household goods fell 0.9 per cent. Consumers shelled out less for clothing, footwear and personal accessories, and reduced their purchases in department stores.
But spending in other retail sectors such as recreational goods (0.8 per cent), pharmaceuticals, cosmetics and toiletries (0.2 per cent), and newspaper and books (0.1 per cent) rose slightly.
Consumers were also more willing to eat at cafes, restaurants and order takeaways, with the sector growing 0.3 per cent.
Spending on household goods fell 0.9 per cent, while consumers also shelled out less money for clothing, footwear and personal accessories, and spent less in department stores.
Mr Cunneen said the results confirmed to retailers they were in a difficult environment, but that they should not be "automatically pessimistic" about this year.
"With the December interest rate cut starting to flow through, [retailers] should be a bit more positive that it should be a better year," he said.
Mr Cunneen added that numerous job loss announcements in the private and public sectors last year weighed on consumers' willingness to spend. But if the labour market started to stabilise, consumers' insecurities and cautiousness in opening their wallets could start to fade, he said.
Turnaround expected by end 2012
HSBC chief economist Paul Bloxham said he expected to see a turnaround in retail conditions at the end of 2012 and at the start of this year as a result of falling interest and mortgage rates.
Global economic conditions also improved towards the end of 2012, he said.
‘‘We only have limited indicators for the Christmas period, but at this stage, it looks like the Christmas trading period was OK and we are expecting further improvement.
‘‘The fiscal cliff situation looks as though it’s been partially resolved in the US. The Chinese economy has certainly turned around and commodity prices have risen quite strongly.’’
Deutsche Bank analyst Michael Simotas said industry feedback for December suggested the Christmas trading season performed solidly.
“Food sales were very strong, apparel sales were robust after a slow start; department stores fared worse than standalone stores … and electronic and appliance volumes were reasonable, [although] price competition was intense and there was a large spike in aircon sales,” he said in a research note.
Online sales strong
Yesterday, data released by the National Australia Bank yesterday showed that online retail shopping surged in November ahead of the Christmas season.
NAB’s Online Retail Sales Index rose by 241 points, up 32 points from October, as consumers bought their presents early to cater for delivery times.
In the 12 months to November last year, Australians shelled out $12.6 billion for online buys, with internet sales making up 5.7 per cent of total retail spending, NAB said.
The Australian National Retailers Association (ANRA), which is pushing for a lowering of the GST online threshold, said the lower November figures was a reflection of consumers’ shift to shopping at international online sites ahead of the Christmas season.
“Retailers anticipated losing about 8 per cent of sales to overseas competitors in the lead up to Christmas 2012,” ANRA chief executive Margy Osmond said in a statement. The ANRA did not provide figures for local consumers shopping on international retail websites.
“These figures make it even clearer that we need the GST tax loophole closed or we will continue to see the retail sector struggle,” Ms Osmond added.