Australia’s retail boom sputters

Via Westpac credit card tracker:

― The Westpac Card Tracker Index fell 4.1pts to 98.8 over the week ended Apr 4 – the first sub-100 national read in just over six months. While this adds to accumulating evidence of a moderation in consumer demand, the latest figures should be treated with extra caution due to shifts in the timing of Easter public holidays, which may account for the bulk of the weekly decline. The latest Index read implies annual growth in card activity is running 1.2ppts below its pre-COVID pace (see p7 for more details on how the index is constructed).

― After a quiet month, COVID-related factors were again in play with Qld calling another snap lockdown at the start of Apr. The detail suggests this had a relatively small impact on Qld card activity although, given the Easter timing, it may also have impacted activity by other cardholders travelling interstate.

― As noted, shifts in the timing of Easter may account for much of the latest weekly decline. This year’s Apr 1 timing compares to Apr 19 in 2019 – the base year used for annual comparisons. The 8.1% weekly decline in card activity this week is comparable to the 9.4% fall in Easter 2019 (which was likely larger due to the ANZAC day public holiday that occurred in the week as well).

― There is no precise way to correct for these holiday timing effects. However, the figures above suggest they could easily drive 5-10pt swings in the index. The timing means negative impacts in the first week of Apr will be followed by a ‘clean’ week then a significant positive impact in the third week of Apr (as Easter enters the base for comparisons in 2019). In practise this means the latest weekly index needs to be read in conjunction with the next two before any strong conclusions about trends can be drawn.

Allow me to punt on the outcome then. The retail boom just ended as services consumption rises and fiscal stimulus is pulled in. Don’t get me wrong, runaway house prices and the rundown of excess savings should keep retail firm but such booms do not generate “equity mate” withdrawal like they used to.

Expect a return to more average levels of retail spending ahead.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. Jumping jack flash

    “Allow me to punt on the outcome then. The retail boom just ended as services consumption rises and fiscal stimulus is pulled in.”

    Business owners get no sympathy from me. They were handed the solution to their 2019 woes on a silver platter, and they stole the platter!

    “Don’t get me wrong, runaway house prices and the rundown of excess savings should keep retail firm but such booms do not generate “equity mate” withdrawal like they used to.”

    Housing boom is a sideshow and will be over as soon as the super (the so-called savings) is spent. There’s probably quite a few households remaining with 40K of super waiting to pounce before it burns a hole in their pocket, but in my opinion this global house price boom on the back of unprecedented COVID stimulus will quickly level off, and the inadequate debt growth of 2019 will resume and businesses can resume closing down all over the place.

    The golden opportunity that was wasted was to reform the debt economy and revitalise the bank’s system for perpetual debt. This involved CPI, wage inflation, and abolishing wage theft (wage theft would finally be absolutely unnecessary due to the windfall of CPI inflation, fueling further wage inflation). Unless we see some remarkable turnaround in CPI over the next few months I think we can put a tag on the economy’s toe and call it, while we wait for the defibrillation charge from the next load of RBA shenanigans.

      • Jumping jack flash

        In a nutshell businesses hoarded the stimulus payments instead of using them to pay workers wages and then raise prices.

        Then to add insult to injury, some of them handed the free cash back to the government! Can you believe it?!
        Do they hate their workers that much?

        They’re cutting off their noses to spite their faces… who do they think uses their goods and services? Martians?
        No, its their workers who consume goods and services, if they’re paid enough to do so.

        Handing out the free government money to their workers and then raising prices would have solved almost all of their problems, plus it would have enabled our debt economy to support more debt.

Leave a reply

You must be logged in to post a comment. Log in now