In news that is certain to disappoint the retail sector, Australian consumers are planning a “restrained” Christmas, with 35% of people intending to spend less than last year. From Westpac:
The November Westpac-Melbourne Institute Consumer Sentiment survey included an additional question on plans for spending on Christmas gifts. The results show consumers are again looking to restrain their spending despite the recent strengthening in sentiment overall.
Just over 35% of Australians said they intended to spend less than last year; 51% were planning to spend the same and 14% said they would be spending more. That is little changed from 2012’s 35%:52%:13% split, and both 2011 and 2010 when the split was 34%:54%:12%. The mix is identical to that in 2009.
All of these years were lacklustre Christmas seasons for retailers. Per capita non-food retail sales over the Nov-Dec period were down 0.6%yr in 2009, 0.3%yr in 2010, up just 0.8%yr in 2011 but down 0.5%yr again in 2012. While some of this may reflect declining prices for retail goods, the average annual growth rate in the 10yrs to 2007 was +4.5%. Indeed, the implied per capita spend in 2012 was 0.7% lower than in 2007.
Overall, the 2013 reading points to another flat Christmas. However, there are some notable differences across states and different parts of the population. Consumers in NSW are planning a much less restrained Christmas spend compared to the last four years.
All other states are showing more restrained plans than last year though, with 2013 plans much weaker than last year in Vic, WA and SA. Qld’ers are the most downbeat though with nearly 40% of consumers in the state planning to spend less this year than last.
There were also significant variations across age groups. There was a significant relaxation in restraint compared to last year amongst 35-44 year olds but 18-34 year olds and 50-54 year olds are looking to rein in spending much more sharply than a year ago.
Taken at face value that might suggest the mortgage belt is responding to easing interest rate pressures. However, the split by housing tenure shows little change in spending plans vs last year for those with a mortgage, with a more pronounced improvement amongst those that own their homes outright offset by a deterioration amongst renters.
The group most inclined to cut Christmas spending this year compared to last were those in the 45-54 year old age band.
Despite the improvement in consumer sentiment in recent months, the continued restraint consumers are showing with regard to their Christmas spending plans suggests we are unlikely to see a near term improvement in ‘discretionary’ consumer spending. That in turn suggests that ongoing fears around job security – consumers’ unemployment expectations remain elevated – may be more than offsetting a more upbeat consumer mood more generally.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
