A new Westpac report called What’s in store claims that retail performance and consumer spending is being “badly” obscured by Government policy. They also claim that consumer spending is set to rise from a forecast 0.4% for the quarter to 0.6%, this say Westpac will deliver a bigger ‘payback’ later in the year.
A new Westpac report called “What’s in store” claims that retail performance and consumer spending is being “badly” obscured by Government policy. They also claim that consumer spending is set to rise from a forecast 0.4% for the quarter to 0.6%, this say Westpac will deliver a bigger ‘payback’ later in the year.
Currently the Australian retail market is witnessing a surge which means that monthly sales in March were 4.5% above the November level that preceded the fiscal package – and 6.3% higher than March 2008, a stronger through the year pace than registered in Dec-Jan and the strongest recorded since January last year claims Westpac.
The report written by the economist team at Westpac, headed by Bill Evans, claims that the consumer picture is being badly obscured at the moment, by policy – both large and transitory fiscal boosts and “as such, it is nigh on impossible to gauge the likely ‘underlying’ pace of consumer demand. Financial shocks and wealth effects mean this underlying pace itself is likely to have been volatile over the last six months”.
“Unfortunately these problems won’t be fully resolved for several months yet. Policy influences will continue to buffet retail sales well into Q3. We continue to see the general backdrop for consumers as remaining bleak. Sales are likely to slow again once policy boosters wash out, with the ongoing weakness in labour markets set to be the main restraint by year end”.
We had expected a continuation of the wind-down in spending associated with the first round of fiscal payments to dominate in March. The $8.7bn injection had seen sales jump 3.8% in December and rise by a further 0.5% in January. And although sales dropped back 2% in February they remained well above their ‘pre-stimulus’ levels. Although the second round of fiscal payments started to go out to households in March, these were set to be ‘drip fed’ over several months – as such; the wind-down was expected to dominate.
The upside in retail spending was dampened by a very strong price component – the implied retail sales deflator jumped 1.5% in Q1, the biggest quarterly increase since the GST introduction and, excluding that, since 1990.