Strong December lifts retail spend

WA outperformed most states in December’s retail spending results, and with an interest rate cut and falling petrol prices, there are hopes of a retail revival.

Western Australian retailers turned over $3.5 billion last December, about $100 million more than in December 2013, bringing the total for 2014 to $32.7 billion, according to recent data from the Australian Bureau of Statistics.

In seasonally adjusted terms, WA was up 0.5 per cent on November, second only to Queensland in terms of growth.

Year on year the figure was more subdued, at 1.7 per cent, but falling petrol prices and interest rates leave potential for strong spending growth in 2015.

CommSec economist Savanth Sebastian said the national statistics showed a good December, despite it being below expectations.

“Low and stable interest rates and the lift in wealth levels are supporting consumer spending,” Mr Sebastian said in the Commonwealth Bank’s ‘Economic Insights’ report.

“The recent rate cut and the likelihood of further interest rate cuts should support activity over the medium term.

“The key shift in household psychology is that rate hikes are clearly off the agenda over the coming year – and that should support spending.”

The Reserve Bank of Australia said in its latest statement on monetary policy that falling oil prices would boost consumption, providing some optimism for retailers and businesses focused on discretionary spending.

But the RBA also said it expected growth to remain below trend.

St George Bank said the RBA had downgraded its growth and inflation forecasts.

“The forecasts imply that the annual pace of growth is unlikely to return to trend before the end of the year,” St George said.

“This is a significant amount of time that the RBA expects growth to remain below trend.”

In WA, performance varied across sub-sectors, with liquor trading, pharmaceuticals and other recreational goods all having a standout month compared with December 2013.

Sales of pharmaceutical, cosmetic goods, and toiletries were up 17.1 per cent on the same time next year, at $173.2 million for the month.

‘Other recreational goods’ sales were 12.4 per cent higher, at $128.7 million.

Liquor retailing had a blockbuster month, up 11.5 per cent on the previous December to $185.2 million, making the annual total $1.45 billion.

Footwear retailing improved 11.9 per cent and finished the year on $825 million.

Food retailing, which is the largest sub-section, was 2.6 per cent higher than the same month in 2013 at just more than $1.3 billion.

For 2014, total food retailing expenditure was $13.3 billion.

Supermarket and grocery stores were 1.5 per cent higher compared with that period, at just more than $1 billion for the month.

That brought the total supermarket spend for WA to $10.8 billion during the year, compared with $10.4 billion in the year previously.

Not all sub-sectors were successful in December, however.

Furniture, houseware and textiles performed poorly, down 3.8 per cent from December of the previous year, while clothing retailing fell 1 per cent.

Cafes, restaurants and catering services were 8.4 per cent lower, although takeaway food was up 5.7 per cent.

In its mid-year budget review, the state government said the September quarter had been very soft for retail.

“Recent movements in leading indicators are also consistent with a moderation in household consumption,” the WA government said.

“The outlook for household consumption over the remainder of the forecast period is broadly consistent with that at budget, with growth in spending projected to slowly increase over the budget period as wage growth strengthens and the unemployment rate falls.”

Retail spending is often seen as a forward-looking indicator of economic activity.

The sector, which is one of WA’s largest employers, has grown by nearly 62 per cent in the past decade, about 5 per cent per year.

Nationally, Australians spent almost $280 billion on retail in 2014.