Consumers pared back their Christmas spending in December, supporting the central bank’s decision this week to leave interest rates on hold, economists say.
Despite heavy discounting, retail trade at current prices fell 0.7 per cent in December to a seasonally adjusted $19.925 billion, from a downwardly revised $20.064 billion in November, the Australian Bureau of Statistics (ABS) said on Thursday.
‘‘It really had to do with the fact that we had a super-charged consumer in November and very strong retail sales in November so we’ve seen consumers have parred back their spending in December,’’ CommSec economist Savanth Sebastian said. ‘‘Pre-Christmas there wasn’t much in the way of consumer activity.’’
Over the December quarter, retail sales rose by 1.1 per cent to $57.448 billion, seasonally adjusted.
The median market forecast was for retail sales to have risen by 0.2 per cent in December and to have increased by 1.0 per cent in the December quarter.
Anecdotal evidence suggested there was not much in the way of strong retail sales leading up to Christmas, Mr Sebastian said.
‘‘The data is showing that while consumers may have come into the market post-Christmas, with people hunting for bargains, there was pretty widespread discounting in the result,’’ he said. ‘‘It really highlights the weaker consumer environment in December.
‘‘The widespread discounting during the post christmas hasn’t translated into significant sales results.
‘‘Overall it was a pretty weak result and it highlights the Reserve Bank decision to stay on hold.’’
The Reserve Bank of Australia (RBA) this week left the cash interest rate unchanged at 3.75 per cent, despite financial markets expecting a 25 basis points hike to 4 per cent.
In December, liquor retailing was significantly weaker, losing around 4 per cent. Department store sales fell 3.5 per cent in the month.
But Mr Sebastian said retail sales would soon pick up.
JP Morgan economist Helen Kevans said rate rises during the December quarter took their toll on domestic shoppers. During that quarter the central bank lifted the overnight cash rate by 25 basis points to 3.75 per cent on December 1, following similar moves in October and November.‘‘The pull-back in spending occurred in the wake of the three straight quarter-point rate hikes delivered by the RBA in the final months of last year,’’ Ms Kevans said. ‘‘The most recent hike marked the first time the RBA has hiked the cash rate in December, ahead of the key Christmas spending period, since 2003.’’
Today's retail report showed the central bank was right on Tuesday when it left the cash rate unchanged, Ms Kevans said.
‘‘We now suspect that the RBA will sit on the policy sidelines for the next eight weeks, a period over which the board will gather more information on the strength of the global economy, the state of financial markets, and the strength of the Aussie consumer following the assertive rises in market interest rate rises since October,’’ she said.
Ms Kevans said the 1.1 per cent rise in quarterly sales during the December quarter, following a 0.7 per cent fall in the previous period, bodes well for gross domestic product (GDP) data due next month.
‘‘The healthy volumes numbers are, of course, important for our fourth quarter GDP forecast, with retail sales accounting for a quarter of GDP,’’ she said.
The ABS is scheduled to release GDP data for the December quarter on March 3.
AAP
