Australian households have posted strong retail spending in June to shut out concerns of dwindling consumer sentiments against the backdrop of the carbon tax and ongoing global economic uncertainty.
June saw monthly retail sales increase 1.0 per cent, exceeding expectations of a 0.6 per cent and taking the growth over the year to June to 5.4 per cent, according the recent ABS figures.
The June figures also capped off a reasonably strong quarter–with May sales adding 0.8 per cent whilst April subtracted 0.2 per cent–that saw retail sales increase by a total of 1.4 per cent.
The increase in consumer spending was shared across all industries, with small discretionary spending items leading the charge. Clothing, footwear and personal accessory retailing rose 1.8 per cent in June, with department stores adding 3.4 per cent in sales, and cafes, restaurants and takeaway food service sales increasing by 1.0 per cent.
However, the household goods sector lagged behind, rising only 0.2 per cent–the smallest of any industry.
It seems that Australians want to spend, but not too much.
The increased spending comes in response to various measures that have managed to reverse consumer caution about spending. The easing of economic policy, in the form of a 75 basis point drop in the cash rate and a cash splurge from the budget, has added about $3 billion to the economy–ready and available for spending, albeit short-lived. And with inflation at a 13 year low, there’s never been a better time to be a consumer.
“The tepid initial response from consumer sentiment to the RBA’s interest rate moves…suggested a much more muted initial response to policy easing. That has not been the case,” said Westpac Senior Economist, Matthew Hassan, in a statement.
“Spending, perhaps reflecting the release of some pent-up demand after several years of restraint and taking the opportunity presented by low prices, has instead risen solidly.”
Even more encouraging are the figures behind retail sales volumes. Over the quarter, sales volumes increased 1.4 per cent and hit an annual rate of 5 per cent–figures reminiscent of the days before the GFC. In fact, volumes have already risen 2.8 per cent this year, which is double the growth that we had over all of 2011.
“It’s particularly encouraging to see that ... retail volumes are now growing at their fastest (annual) pace in three years,” said Treasury Wayne Swan in a statement.
The strong retail figures will surely give the all-important GDP figures (released in September) a boost and at the very least set up our retail sales for a strong year.
“Retail sales now look set for a relatively good calendar year, a welcome reprieve after four years of ’recession like' demand conditions,” said Mr Hassan.
Whether the positive spending will continue remains to be seen (surely the government can’t keep handing out cash). Consumer caution may once again prevail if global economic concerns escalate over the next few months. Retailers will surely hope otherwise as they continue to enjoy demand they haven’t seen in years.
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