Woolies slows: There’s a rumour going around that next Thursday’s ABS retail sales figures will show a second monthly fall. The ABS said the February sales were down 1.4% (and a 1.1% rise in January) and the story says March will be larger. After the quarterly sales figures of several retailers in the past week (including Coles and Harvey Norman), that won’t be such a shock, especially after Woolies today reported a sharp slowing in third quarter sales growth, with actual falls in its BG W and consumer electronics chains for a second quarter on a same-store basis.

Woolies slows. Woolies said its third-quarter group sales were $12.9 billion, up 3.8% (excluding petrol) and 3.3% (Easter adjusted), and up 4.7% including petrol (4.3% allowing for Easter). In the six months to December, the retailer said sales were up 6%, or 4.2% with petrol included. Same store sales are the only real measure and in Woolies heartland, its Australian supermarkets and liquor business, third-quarter sales rose 2.0% (7.9% in the same quarter a year ago) and 4.8% for the first half and 3.8% for the second quarter. Woolies said there was no food price inflation in the third quarter (11.6% in the first half), which helped help lower the growth rate, but didn’t account for all the fall.

Woolies really slows. But in Big W, its general merchandise arm, sales growth fell. Big W sales declined by 3.7% (4.8% decline Easter adjusted). The third quarter last year saw sales up 9.0% (9.7% increase Easter adjusted). Comparable sales in the third quarter fell 4.7% (Q3 09: 6.0% increase) or 5.8% decline Easter adjusted (Q3 09: 6.7% increase Easter adjusted). And total consumer electronics sales declined by 2.4% (Q3 09: 16.0% increase) or 1.5% decline Easter adjusted (Q3 09: 16.3% increase Easter adjusted). For Big W it was the second quarterly fall in same-store sales and that was also the experience in the Australian consumer electronics businesses.

Woolies cuts: Woolies blamed the absence of stimulus spending from this year for the fall in growth rates and the actual falls in Big W and in the consumer electronics businesses. That will no doubt come as a surprise to the federal opposition and the loony right-whingers who still think there’s a huge surge of stimulus spending boosting retailers. As a result, Woolies has halved its sales guidance for the 2010 financial year to a range of 3% to 6% growth, from its previous “upper single digits” (say 8% or 9%). Profit is still forecast to rise by 8% to 11% for the year.

Lending growing: But as retail sales growth seem to be slowing, Reserve Bank figures show lending is rising: up 0.5% in March over February (0.4% up), to be up 2.1% for the year to March from 1.6% in Feb. It was the best annual rate since last August. While housing loans have supported the banks and other lenders for much of the past year, business lending is growing, up 0.1% in the month from February, the first rise for 13 months. Business credit is still weak, down 6.9% in the year to March, against 7.6% for the year to February. Other personal credit (margin loans, credit cards) continues to grow, up 0.5% in March from a revised (upwards) 0.5% in February (up 0.4% originally). That produced a yearly rise of 2.4% against 1.4% in February. Housing credit continues to plateau, up 0.7% in March from the same increases in February and going back to November. Lending rose 8.5% over the year to March, unchanged from February.

Greece saved: Reports say Greece has agreed to slice a massive €24 billion from its budget spending to get its hands on the €45 billion of help from the IMF and eurozone countries. The package, the second rounds of cuts from the government, reportedly includes a three-year wage freeze for public sector workers. The retirement age will be lifted from 53 to 67, bonuses paid to pensioners and state employers will be ended and the VAT will be lifted (a second time) and other stringencies will be imposed. The final agreement is expected to be revealed shortly, but the Financial Times and other media report that it could cut the deficit by 10 points of the country’s GDP (i.e. from 13.6% to about 4%). That will allow Greece to prepare to access the support. The deal is likely to spark protests across Greece and an upsurge in anti-foreigner sentiment. Shares jumped and yields on government bonds fell sharply. Over to Germany, which has to agree finally to contribute €8.4 billion to the first round and more to the €120 billion estimate for the next three years. Hopefully there will be a big announcement on Sunday.

Germany helped by Greece’s pain: Germany is still reluctant to help Greece, but the European Commission says financial aid will be provided as soon as talks in Athens on the country’s austerity package are concluded with the IMF and the EC. The quibbling and inept handling of the crisis, especially from Germany, has seen the euro fall to year-lows this week, and the weakness has helped exporters across the EU, especially in Germany. So it’s somewhat ironic that Germany overnight reported the biggest fall in unemployment in more than two years. Seasonally adjusted unemployment fell 68,000 to 3.28 million, the best since the start of 2008. The unemployment rate fell to 7.8%, the lowest since December 2008. Danke Griechenland!

European confidence: So given the fall in unemployment and other data, it shouldn’t be surprising that European confidence in the economic outlook was at its highest in more than two years at the start of this month. The survey was done across the eurozone by the European Commission in the first 10 days of April, well before the bad publicity on Greece last week and this week. But that’s not showing up in demand for credit from business. European Central Bank figures showed another fall in lending to business, down an annual 2.4%. But there was an encouraging rise in lending to households, up an annual 2.2% in March from 1.8% in February.

BRIC rate: Brazil’s central bank raised its core interest rate by 0.75% overnight, joining Australia, India, Vietnam and Malaysia in lifting rates, and the likes of Singapore and China in tightening monetary policy overall. The central bank lifted its overnight rate to 9.5% from 8.75%. It was the first rate rise since just before Lehman Brothers fell over in September, 2008. Brazil is a member of the so-called BRIC countries; Brazil, Russia, India and China. Brazil’s move makes it three BRICS on the tightening path. Russia, by contrast, cut rates overnight by 0.25% to 8%, but the central bank warned that rates could start rising later in the year (so why cut now is the obvious question? But it’s Russia, so why ask?).

Where’s Warren? A big test for investment god Warren Buffett at the annual meeting of his Berkshire Hathaway company in Omaha, Nebraska, this weekend. Goldman Sachs (he saved it in December 2008) and the performance of ratings agencies (he’s big holder of Moody’s shares, despite selling down heavily in the past 19 months) will be on the list of concerns for many of the 35,000 or more people at the three-day talk fest. Buffett’s defence or comments on those investments could very well define his reputation, especially what he says about Goldman Sachs where he has $US5 billion invested. Buffett has been silent on Goldman since the Securities and Exchange Commission launched its charges on April 16. The New York Post today reported  that Goldman is moving to settle the action to end the damage to its reputation.

Time for Warren’s morals to emerge: Then there’s the billions of dollars of financial derivatives Berkshire holds. Buffett has criticised these types of investments in the past: these are different to the CDOs, synthetics, options, etc, that the likes of Goldman made and sold willy nilly, but they are derivatives nevertheless. Berkshire was paid billions to hold the derivatives, which it has invested in the share market (and was forced to book losses in 2008 and then unwind those losses in 2009). You only have to own one Berkshire share and you can attend. The costly ones are the A-class shares, which Buffett dominates. Most shares held are the B-class non-voters. There are millions more B-class shares after he split them 50 times earlier this year to make them more tradeable in the wake of the takeover of the Burlington Northern railroad company. That added 65,000 new shareholders as well.

Fancy that: On Wednesday the panel for next Monday night’s Q&A was announced as Penny Wong, minister for climate change, Liberal senator Nick Minchin, Aussie Home Loans chief John Symond, policy analyst Jessica Brown, and trade union leader Paul Howes. At 5.41pm yesterday, the panel was announced as climate change minister Penny Wong, Liberal senator Nick Minchin, Greens senator Christine Milne, trade union leader Paul Howes and Aussie Home Loans chief John Symond. So what did Brown do to get flicked, or rather, what did the Greens say to get Milne on the panel?

Peter Fray

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Peter Fray
Editor-in-chief of Crikey