Government stimulus packages do work: retail sales surged 3.8% in December, seasonally adjusted, as the federal government’s pre-Christmas handout was spent.
It was a spending spree that lifted all retailing sectors and in every Australian state and territory.
Helped also by cheaper petrol prices and 3% of interest rates cuts, Australian consumers spent a record $19.2 billion in December, in the biggest splurge in eight years.
The ABS said the "seasonally adjusted estimate increased by 3.8% in December 2008.
This follows increases of 0.4% in November and 1.0% in October 2008. It should be noted that the full retail sample was reinstated from November 2008."
That’s a clear sign that retailing has probably been doing a bit better than suspected. In any case our sales are still positive, unlike those in New Zealand, Europe, the UK, Japan and the US.
The Bureau said the monthly rise was so great that it forced it to suspend the trend series of measuring sales until they settle down.
It was the biggest monthly rise since the post GST surge in August 2000. The key point to watch for now is how long the surge remains in the system.
No doubt some will claim that we don’t need another $12.7 billion in one-off payments handed out over the next couple of months. Malcolm Turnbull and the federal opposition appear not to think so. I wonder what Australian retailers are going to be telling him on behalf of the hundreds of thousands of people they employ.
The December package was worth $10.4 billion, but some of that was in increased grants for first home buyers and new home buyers.
Building approval figures out yesterday however revealed little impact from this for the month because the grants were only started to be paid then.
The housing finance figures for December are due next Wednesday and should show a pick up, as the November figures did.
If anything they reinforce the strong suggestion that Australia hasn’t bee as badly hurt as yet by the global crunch and slowdown.
The sales figures also confirm what RBA Governor, Glenn Stevens said in his post 1% rate cut statement:
"Economic conditions in Australia have also been affected, though less than in other advanced economies. Australia’s financial system remains in a strong condition and large interest rate reductions over recent months have been passed through in substantial measure to end borrowers."
(The Commonwealth Bank’s strong earnings outlook is evidence of that).
The banks continue to raise billions of dollars in the corporate bond market, showing that the real investors are not worried about their problems because of the government guarantee.
Figures from the Australian Bureau of Statistics yesterday containing the re-instated seasonally adjusted retail trade series revealed the surge was spread across most sectors and right across the nation.
The ABS said that in seasonally adjusted terms, all industries had an increase in December 2008, with Food retailing (+1.4%), Department stores (+8.3%), Clothing and soft good retailing (+5.8%), Household good retailing (+9.9%), Other retailing (+2.6%) and Cafes, restaurants and takeaway food services (+1.7%).
And, according to the ABS, retail sales rose the most in sluggish NSW where they were up 4.9%, in seasonally adjusted terms.
The ABS said all states had an increase. After NSW, Victoria was up 3.9%, Queensland 3.2%, South Australia 2.4%, Western Australia 2.8%, Tasmania 4.2%, Northern Territory 4.8% and Australian Capital Territory 3.0%.
December is normally the best time of the year for retailers and spending rises, but thanks to the package, spending last December it really surged.
The Bureau said that "in original terms, Australian turnover increased by 29.0% in December 2008 compared with November 2008. Chains and other large retailers increased by 34.0% while the estimate for ‘smaller’ retailers increased by 20.1%.
"Australian turnover increased by 5.7% in December 2008 compared with December 2007. Chains and other large retailers increased by 8.7% while the estimate for ‘smaller’ retailers increased by 0.3%."
So far the country’s biggest retailer, Woolworths, has reported solid sales for the first half of the year, including December.
Its Big W general merchandise chain lifted same store sales by 6.4%, its consumer electronics business by 6.9% while in Food and Liquor same store sales were up a strong 7.1%.
Harvey Norman hasn’t produced a set of Australia-only figures, but the company battled negative sales growth for much of the last quarter, with growth only appearing in early December.
Harvey Norman yesterday revealed that it was closing its new five store OFIS chain which was set up to take on Officeworks, now controlled by Wesfarmers. That will cost Harvey Norman up to $8 million.
And David Jones today confirmed that first half sales fell 6.5% on the same period of the 2008 financial year.
First half sales totalled $1.06 million compared to $1.14 million in the first half of fiscal 2008, with second quarter sales off 6.6% to $619.9 million from $664 million the previous year.
First half sales on a comparable store basis fell 7.9%, but were down a massive 9.2% in the December quarter. Clearly Santa and the bonus didn’t call at David Jones in December.
For building approvals in December, the Bureau said that the seasonally adjusted estimate for private sector houses approved fell 2.3%.
"The seasonally adjusted estimate for private sector other dwellings approved fell 2.8%. The seasonally adjusted estimate for the value o
