Well, it’s no wonder the Reserve Bank lifted rates today.
Naughty Australian shoppers kept their wallets open in December and spent up big for the festive season, according to figures from the Australian Bureau of Statistics. Now the bills will have to be paid.
Retail sales rose 0.5% in the month, down from the 0.8% rise in November (which was up from the low 0.2% rise in October).
The outcome was a touch under the market forecast of 0.6%. Retail sales rose a very solid 1.6%, in the quarter, from the previous three months. That is well above the forecast from the market of 1.1%. That was after a 2.0% rise in the September quarter.
In annual terms retail sales rose 5.7%, seasonally adjusted, which was the fastest since 2004.
In original terms they were up 7.6%, according to the ABS. That’s the basis for all retailers and it’s been in the 7% to 8% range for most of the year, hence record earnings for the likes of Woolworths, Harvey Norman and David Jones.
It’s clear the November rate rise and higher petrol prices didn’t have an impact on the willingness of consumers to spend in the lead-up to Christmas. In fact there was a rate rise in August which caused a small pause, before the wallets were opened again.
With employment still strong and incomes rising, there’s no reason to suppose that consumers would pull back, despite concerns in the month about financial markets, which spilled over into January.
Consumer sentiment eased in December and the National Australia Bank said in its latest quarterly economic survey out today that the economy had peaked, although conditions remained very solid.
Business confidence was at a 12-month low in December, according to the NAB survey, which also detected some signs that activity levels might be turning higher, although a better picture would emerge in January’s survey, due out next week.
The bank said there was also growing evidence of strong price inflation emerging in retailing with margins growing.
Major retailer, Harvey Norman has already signalled that 2007 was a good year for it, with the December quarter seeing a rebound in topline and same store sales growth.
Woolies reported top line sales growth of 8.6% for the first half, which was a bit under the 9% to 10% expected to the market, but still solid and expected to drive record interim profits for the giant.
Harvey Norman said last month that sales climbed 13% in the December quarter, thanks to higher sales of consumer electronics, which were among the few products to fall in price in the quarter, according to the Consumer price Index.
Sales of household goods jumped 1.8% in December from November and sales of recreational goods advanced 1.4%; spending on food climbed 0.7% but clothing sales fell 0.9%.
The ABS said there has been moderate trend growth for four months. “Food retailing (five months), Household goods retailing (ten months) and Hospitality and services (12 months) have had moderate growth. Recreational good retailing (six months) and Other retailing (seven months) have had strong growth.