18 May 2024
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Valentine’s Day spending is a test of love and the economy

Peter Switzer
14 February 2024

Retailers who sell plenty today on Valentine’s Day might be worried that high interest rates will stop romantics with a mortgage from putting their wallet where they heart is. But at least those who can’t buy a home might come to the part-rescue.Yep, the Australia Retailers Association says consumers between the age of 18 and 34 are tipped to spend the biggest chunk of the $465 million expected to be outlaid on flowers to show one’s love for one’s partner or potential partner!This largely mortgage-free group is tipped to spend $145 million on flowers, but they will be feeling the pinch from imposts such as rent and other cost-of-living slugs, so their flower spend should be down 32% or $70 million.The AFR’s Gus McCubbin looked at how higher interest rates and inflation generally are hitting the economy, and this Valentine’s Day spending test will be something economists and the Reserve Bank will be watching. “Overall retail sales are expected to grow at just 2.5 per cent over the next 12 months, compared with 3.4 per cent last year, and will be pulled lower due to falling inflation – which has boosted prices but pushed down volumes – according to MST Marquee, he reported. “Shares in small appliance make Breville fell 10% on Tuesday as investors punished the stock for weaker than expected first-half sales as it sacrificed promotions to preserve margins. Two weeks ago, vacuum retailer Godfreys collapsed after 90 years in business.”Over the next three months, economists will be looking at all sorts of spending indicators to see how the combined effects of higher mortgage rates and the so-called mortgage cliff will ultimately hit the economy and jobs.If there is a bigger-than-expected fall in economic growth and a bigger-than-expected rise in the jobless rate, then the RBA could move to cut in the middle of this year.That would give AMP’s chief economist, Shane Oliver, a good chance of being right about three cuts in rates before Christmas Day! Now that would be a gift a slowing economy of consumers, workers and business owners would love!

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