The Australian economy seems to have ended 2012 much as it started — sluggishly — if the emerging data for December and the December quarter are any guide. We have already seen weak employment figures, weak housing approvals but a slightly stronger trade performance in December at least. House prices however rebounded to end the year positively.
But the other vital indicator, retail sales, ended the year with a bit of a damp squib, down 0.2% seasonally adjusted in December, after a similar sized fall in November, according to the latest figures released this morning by the Australian Bureau of Statistics. The report and shape of the data flow adds further support to the Reserve Bank’s assessment of the economy in the statement accompanying the announcement of its rate pause yesterday:
“During 2012, there was a significant easing in monetary policy. Though the full impact of this will still take further time to become apparent, there are signs that the easier conditions are having some of the expected effects: the demand for some categories of consumer durables has picked up; housing prices have moved higher; there are early indications of a pick-up in dwelling construction; and savers are starting to shift portfolios towards assets offering higher expected returns. On the other hand, the exchange rate remains higher than might have been expected, given the observed decline in export prices, and the demand for credit is low, as some households and firms continue to seek lower debt levels.”
The December retail trade data contains nothing to alter that assessment. If anything, the November fall was revised down to a drop of 0.2% from the initially reported decline of 0.1%. According to the ABS:
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“The largest contributor to the fall was other retailing (-2.8%) followed by cafes, restaurants and takeaway food services (-1.1%) and food retailing (-0.1%). These falls were partially offset by rises in clothing, footwear and personal accessory retailing (2.1%), household goods retailing (0.8%), and department stores (0.8%). Over the longer term, the weakest performing industries were household goods retailing (down 0.4% in trend terms) and other retailing (down 0.5%).
“The largest contributor to the fall was New South Wales (-0.7%), followed by Victoria (-0.2%), Western Australia (-0.3%) and the Australian Capital Territory (-0.8%). These falls were partially offset by rises in Tasmania (2.0%), the Northern Territory (0.7%) and South Australia (0.1%). Queensland (0.0%) was relatively unchanged. Over the longer term, South Australia was the weakest performing state (down 0.4% in trend terms) whilst Tasmania has fallen in trend terms for 14 consecutive months.”
The trend estimate for Australian retail turnover fell 0.1% in December after an unchanged November and October. October’s trend rate was originally reported as a rise of 0.1%; that is now been cut to no change at all. The ABS said that in “volume terms, turnover rose 0.1% in the December quarter 2012, seasonally adjusted, following a fall of 0.3% in the September quarter 2012”.
But even though the figures make somewhat gloomy reading, remember car sales posted record sales in 2012 and started the year with a solid rise to more than 85,000 in January — 11% above the figure for January 2012. And there are signs new home sales are starting to improve, even if home lending remains weak, as the RBA data last week revealed.
Since the release of the RBA statement yesterday, the Australian dollar has fallen, risen and then dropped; it’s around half a US cent lower in Asian trading as dealers reckon the weak retail sales figures add to the feeling the RBA will cut rates next month or in April.