Yesterday’s disappointing retail sales data, which registered a -0.1% fall in retail sales in November, undershooting the market’s expectations of 3.0% growth over the month, 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 have rebounded somewhat, but with sales growth at only 2.9% annually, they are failing to keep up with both population growth and inflation (see below chart).
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, retail sales growth after rates were first cut in November 2011 is on par with the 1996 cycle, but well below the 2008, 1990 and 2001 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 -3.4% lower this time around at the same stage of the cycle:
Anecdotally, retailers reported solid but not spectacular sales over the Christmas and New Year’s period. It will be interesting to see whether these reports are supported by the ABS’ retail trade figures for December, which are due for release this time next month.
