For months the retailers kept telling us, and economists and the Reserve Bank thought they were just whinging shopkeepers, but the official data has now confirmed consumers have cut back on spending, with retail sales falling by 1.4 per cent in February.
To cut deeper into the figures department stores, retail chains and other large retailers recorded what economists call trend growth of just 0.1 per cent in February. This was the weakest reading in records going back almost 16 years.
And until today we thought the big retailers were doing pretty well while small retailers were suffering more because they don’t have the same wiggle room to cut prices.
In fact, the 1.4 per cent fall in retail sales is being borne by the smaller guys as at least the bigger stores have seen that miniscule growth of 0.1 per cent!
Meanwhile, to keep the gloomier news coming dwelling approvals fell by 3.3 per cent in February, with the majority of the weakness due to a slump in private sector apartments and houses. Dwelling approvals are still up 34.2 per cent on a year ago.
Note, the fall has come out of the “private sector” and that means the public or government sector has helped keep these figures from being even more disastrously negative.
In slightly better news, private sector credit or loans rose by 0.4 per cent in February. Personal and housing credit were the key drivers, but again business loans fell. That’s 13 months in a row of falls for business borrowing.
To show I am balanced and I do look for positives, in annual terms personal credit was up 1.4 per cent, which is a 17-month high. However, if you think back 17 months ago, that’s when the stock market was crashing! So that’s no achievement.
But it’s not all sad sack stuff with CommSec’s Savanth Sebastian pointing out that the RP Data-Rismark Hedonic Australian Home Value Index told us that home prices rose by 1.4 per cent in February to record highs, after rising by an upwardly revised 2 per cent in January. Home prices are up 12.7 per cent on a year ago – the fastest rate in 25 months.
Once again it is good news but it compares to a time when interest rates were nine per cent-plus and house prices were falling.
Regrettably, the cheer squad for the Reserve Bank will be finding reasons to justify an interest rate rise next week but they seem under the spell of the Big Bank. There’s a lack of critical analysis from many economists and they seem to be trying to guess what the RBA will do, rather than what it should do. Dr John Hewson argued on SWITZER on Sky News Business Channel this week that the Reserve Bank is getting ahead of itself in forcing the pace of interest rate rises.
Regular readers know where I stand on the subject — the RBA is right to be raising interest rates but it has been too fast.
The Kochie interviews were to help the mums and dads of Australia understand why interest rates have to rise. But if the RBA raises interest rates on Tuesday and the economic data continues to get worse then even Kochie would have to turn on Glenn Stevens.
Don’t do it Glenn!
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