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Retail spending down in December

Reported by AAP
Wednesday, February 6, 2013
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A fall in retail spending in December shows consumers remained cautious at the end of 2012.

Figures released by the Australian Bureau of Statistics on Wednesday show retail trade fell 0.2 per cent in December to a seasonally adjusted $21.421 billion.

The market had expected spending to be up 0.3 per cent for the month.

JP Morgan economist Tom Kennedy said the figures showed consumers remained cautious about how they spent their money in late 2012.

"What you can say is that consumers in the back half of 2012 were pretty cautious and that has really become apparent in their spending habits," he said.

Mr Kennedy did not expect the sector to pick up substantially in early 2013.

He said the figures were unlikely to prompt the Reserve Bank of Australia to cut the cash rate again in the next few months.

"I don't think this number is really a bell ringer for the RBA, although it would lend towards rates moving lower over the coming months if the consumer sector was to remain fairly soft," he said.

National Australian Bank senior economist Spiros Papadopoulos said the weak outcome is further confirmation of how tough conditions are in the retail sector.

"It's a further sign that consumers are holding back at the retail level, holding back on the large discretionary purchases and, as a consequence, retail figures continue to be quite subdued," he said.

Mr Papadopoulos said households have been saving a lot more in recent years.

"They certainly seem to be in a fairly good financial position, but they're just choosing not to spend that money in the same way that they were prior to the GFC (global financial crisis)," he said.

The fact that consumer sentiment remains weak will give the Reserve Bank of Australia more reason to consider cutting interest rates in March, he said.

"It's another sign of the weakness in the economy, but I don't think they'd be cutting rates just because the retail sector is weak," Mr Papadopoulos said.

"I think the bigger consideration for the RBA will be what's happening to other parts of the economy, such as investment, the unemployment rate, etcetera."

Westpac senior economist Matthew Hassan said the figures show a shift in consumer demand.

"Basically they show that (sales) volumes were tracking lower for the whole of the second half of last year," he said.

"I think more generally we had a fragile consumer picture through the second half of last year, particularly around mid year with a very significant rise in fears around job losses and that may have come through to spending."

Mr Hassan said he doesn't think a shift to online spending was a major factor in the pre-Christmas retail spending slump.

"Some of this is caused by industry specific issues with online sales from offshore providers but even allowing for that it does point to a much softer consumer demand picture from late last year than originally indicated," he said.

Mr Hassan said he expects the central bank will cut the cash rate at its March board meeting after deciding not to cut at on Tuesday.

01/11/2014 09:05Sydney, Australia. 1 November,2014
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