Once again many market economists and media commentators have been brought undone by the economy.
Many in both groups jumped on the doom and gloom bandwagon this week and lifted their forecasts of the size of the March quarter fall in GDP, and many went on to argue that the economy was on the brink of a recession, with retailing doing it tough.
Some of course didn’t, pointing to the quite strong rise in household consumption and income in the quarter, while others said the recovery in the trade account would help boost the economy this quarter.
So imagine the surprise among the doom and gloomers at the April retail trade figures from the Australian Bureau of Statistics yesterday which showed a 1.1% jump in the month.
That was more than double the 0.4% rise expected by analysts (another miss to go with March’s retail sales fall of 0.5%, revised up to a fall of 0.3%).
It was the best monthly performance since the equally surprising 1% jump last February and the biggest since November 2009, which also took the market and many in the media completely by surprise.
Even if sales don’t grow in May and April, there’s enough momentum from the April surge to give us a small positive contribution to economic growth in the current quarter.
But sharper than expected improvement will also raise the hackles at the Reserve Bank ahead of next Tuesday’s board meeting.
Department stores led the way (they are supposed to be doing it tough with the internet taking their business), with a 3.6% rise in April.
Department store sales are up 6% in the year to April, which is real growth and solid.
But that shouldn’t be too surprising, after all both David Jones and Myer both mentioned the emergence of a strengthening tone in April in their third quarter sales updates last month.
For example, DJ’s CEO, Paul Zahra said, “Trading conditions were difficult throughout the quarter however in April we experienced an improvement in retail conditions due to a later Easter and colder weather".
And Myer CEO, Bernie Brookes told the market, "There was a moderate and steady improvement in sales as the third quarter progressed and we had a pleasing mid season sale, which was ahead of last year".
The ABS said yesterday "turnover rose in Food retailing (0.9%), Other retailing (2.0%), Department stores (3.6%), Household goods retailing (0.7%) and Clothing, footwear and personal accessory retailing (1.2%)".
But it was down 0.3% in cafes, restaurants and takeaway food services which had been the star performers up to the start of the year.
But food sales in supermarkets and other shops are now up 4.8% in the year to April.
Turnover rose in the big states with heavy retail concentration like Victoria (up 2.8%) and NSW (up 0.1%).
Queensland saw a solid rebound from the floods with sales up 1.8%, Western Australia up 0.6%, and Tasmania up 0.5%.
Sales fell in some of the smaller state markets such as South Australia (-0.4%), the Australian Capital Territory (-0.6%) and the Northern Territory (-0.8%).
As we pointed out yesterday, the March quarter national accounts showed households not only saving heavily (the savings ratio rose to 11.5% from 9.7% in the December quarter), but spending as well with household consumption up a solid 0.6% in real terms.
That pushed the measure up 3.4% in the 12 months to March.
Household disposable income jumped 3.4% in nominal terms in the March quarter and 8.3% over the year. In real terms (after inflation) it means household spending power is up by around 5% in the past year.
That was obvious in April’s boost (and February’s for that matter).
The why isn’t hard to see: the terms of trade rose 5.8% in the quarter and 22% over the past 12 months. Unemployment has fallen to 4.9% with around half a million new jobs in the past year or so. Wages are up around 4%.
People are buying more online, domestically and internationally, but that can’t be quantified.
But the caricature of the consumer scared, doing it tough and not spending, but saving, is an invention of some commentators and even silly politicians, who all should know better.
