Yesterday’s disappointing retail sales data, which registered a -0.2% fall in retail sales in December – the third consecutive monthly decline – is arguably further confirmation that the -1.75% of cuts to official interest rates since November 2011 is failing to gain traction.
After bottoming through 2010 to 2011, retail sales rebounded mid last year on the back of one-off compensation payments for the introduction of the carbon tax. Since then, however, retail sales growth has been in decline, with annual growth slipping to just 2.3% in dollar terms (see below chart) and 2.6% in volume terms.
Not surprisingly, this ‘rebound’ in retail sales following interest rate cuts is also weak from a historical perspective. The next chart shows the growth of retail sales following the past five rate-cutting cycles, specifically those beginning in: 1990; 1996; 2001; 2008 and 2011 (the current cycle).
As you can see, the growth of retail sales after rates were first cut in November 2011 is the weakest of the five interest-rate cutting cycles.
The situation is shown more clearly in the next chart, which tracks the current cycle’s sales growth against the average of the other four rate-cutting cycles, and reveals sales growth -4.2% lower this time around at the same stage of the cycle:
unconventionaleconomist@hotmail.com
Morning all, yes after reading yesterday’s post on Roy Morgan January unemployment figures being above 10%, IMHO from what I see and hear around me in Sydney the unemployment including those working maybe 10 hours per week has been around 10% for even most of 2012, so there is less to spend out in consumerland. Most people would have had plenty to eat and drink over the festive season but I know the general discussion topic around Christmas was how little they were going to spend on actual gifts.
But I still don’t understand how at the same time there are so many foreign new SUV’s and prestige vehicles on the roads.
On our recent camping holiday (where the holidaymakers were 70% Victorian 30% South Australian), we felt quite out of place not having a shiny new Prado, Landcruiser or top of the range camper trailer. I thought to myself, if I had the money to buy one of these I’d be staying in some luxury 5-star spa resort instead of camping in an overcrowded caravan park!
People can’t afford their balloon payments as warranties (usually 3 years) are coming to an end so they just re-lease a new vehicle to avoid both a significant resale value dive and higher repayments in a new loan. I may be wrong but there aren’t many cash buyers. All of your finance guys at dealers work this way. They just ask you how much you want to pay and work it from there.