Recessionberg stupidity index booms with stimulus FAIL

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Via Westpac:

The August retail update showed sales up 0.4% in the month. While this was broadly in line with the consensus forecast of a 0.5% gain it is a disappointing result given the scale of the policy stimulus boost to disposable incomes. The combined effect of income tax offset refunds and interest rate cuts is estimated to be adding around $16.6bn to household disposable incomes over the year to June 2020. Even allowing for a delayed response and a low pass-through to spending, August should have started to see a meaningful lift in spending. As it stands, the 0.4% gain suggests the ‘cash splash’ is barely a trickle so far.

The storetype detail was mixed at best: basic food retail up 0.4%, department stores and clothing faring better (up 1.1% and 1.8% respectively, albeit with the latter coming off a choppy few months), but household goods (0.5%) and ‘other retail’ (+0.3%) subdued and cafes and restaurants recording a back to back monthly decline (-0.3%). To the extent that there is any stimulus effect is looks confined to only some ‘small ticket’ discretionary spending categories.

Sales were subdued in most states, up just 0.3% in NSW and Vic, a touch firmer with a 0.8% gain in Qld.

Overall this is a disappointing result suggesting that the stimulus cash has not been deployed and/or underlying conditions may be weaker than estimated (i.e. stimulus effects may have prevented an outright sales decline). Either way it marks a softer than expected trajectory for the consumer so far in Q3.

That’s what happens when you use tax cuts instead of traditional Keynesian stimulus. The whole point of it is that the money is that the public money spent when the private sector won’t to support employment.

L-plate Treasurer Josh Recessionberg thought it better to overlook a century on basic, hard won economic pragmatism. Now his index is booming:

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About the author
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.