Consumers cautious in the face of winter blues

Friday July 13, 2012 Dr Adrian Slack


Following on the back of the past few months’ positive signs, retail sales continued to recover in June.  Compared with May 2012, seasonally adjusted purchases via eftpos and credit cards rose by 0.4 percent.  In the core (non-motor vehicle) retail industries, sales rose by 0.9 percent.  This contributed to a 3.4 percent rise in core sales compared with June 2011.


Overall, the main gains were in hospitality (up 3.1 percent), motor vehicle sales (up 1.4 percent) and consumables (up 1.0 percent).  The increase in hospitality, which includes accommodation, restaurants, and takeaways, indicates that consumers might be treating themselves to a night out or a weekend away. This is consistent with spending in the group including travel, which rose by 0.7 percent in the month and 1.0 percent over the June quarter.


The gains seem to indicate that households, at least, are cautiously positive. This is backed up by the housing statistics.  For both the month of, and year to May 2012, the number and value of houses sold increased.  A new house means new stuff, with sales of durable goods coming in as the fourth biggest increase in sales in June (0.5 percent).


These figures provide a balance to consumer confidence measures that indicate greater consumer pessimism.  Treasury notes in its June Monthly Economic Indicators that “after posting five consecutive rises, the seasonally adjusted ANZ-Roy Morgan consumer confidence fell 2.0% points in May and a further 6.1% points in June.”  The biggest fall in sales was at the pump, where falling petrol prices saw the value of fuel sales fall by 4.0 percent.  Once again, though, for consumers this is a positive rather than something to be blue about.


In summary, while the growth in retail sales is positive, the magnitude of the growth indicates on-going caution on the part of the consumer.