Westpac’s magical Red Book included a special on Christmas spending this month and despite the turn in consumer confidence, it showed a subdued result.
The Nov survey included our annual questions on Christmas spending plans. The results suggest that despite the improved tone to sentiment consumers are approaching this year’s festive season with much the same degree of restraint as last year and the year before.
When asked about planned gift spending, 35%said they intended to spend less than last year;52% said the same and 13% said they would be spending more. This is virtually unchanged from 2011’s 34%:54%:12% split which was in turn unchanged from 2010. All of these years were lacklustre Christmas seasons for most retailers.
With six years of survey history now there does appear to be a clear negative bias to reported spending plans. Those saying they plan to cut outnumber those increasing even in bumper years like 2007.
There are clear fluctuations in the mix of responses year to year though. While plans were still negative in 2007 they were markedly less negative than in other years and 2008 was a disastrous reading – the only survey to find more consumers planning to spend less than those spending the same as the previous year.Viewed against these benchmarks, the 2012 survey looks subdued rather than strong/weak.
The linkage to actual spending is still difficult to pinpoint. While 2007 was a good Christma sspending-wise, aggressive policy easing and direct fiscal payments softened the blow from the disastrous reading in 2008. However,the flat results in 2009, 2010 and 2011 (per capita retail sales ex food –0.4%yr, 0.0%yr and+0.9%yr respectively) suggest the 2012 result is consistent with another ‘dud’ Christmas sales season rather than a disaster.
The state detail is more interesting. Whereas plans are similar to last year for consumers in NSW, Vic and SA, Qld’ers are cutting back sharply while those in WA are more upbeat.
The picture is more downbeat when consumers are asked about their actual budget for gifts. Just under 40% say they will spend over $500,well below the 47% recorded last year. Just over a quarter (26%) expect to spend $300 to $500(vs 19% % last year); and 35% plan to spend less than $300 (about the same as 2011).
The implied median expected spend of $419 is down 10% on 2011. The inconsistency between this and responses on ‘spend vs last year’ maybe a distribution effect – planned spend is down sharply for those in middle and higher income brackets who have a higher median spend. This in turn suggests an uneven Christmas season.
All pretty plausible it seems to me. Credit card data gives no indication of an increase in appetite for spending and although there may be a stirring in Australia’s real estate nut gene, it’s way too early for any wealth effects.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
