Retail green shoots with slight revival in August
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The latest retail figures for August, released by the ABS today, shows Australian retail turnover rose 0.2%, when seasonally adjusted.
The figures show an improvement from the 0.8% retail slump recorded in July, Australian Bureau of Statistics said today.
The largest contributor to the improvement in August were department stores which grew almost 7%, followed by food (+0.4%) and other retailers (+0.4%), which includes media and entertainment.
But there was bad news for bricks and mortar department stores like David Jones and Myer, as it “remains the weakest performing industry over the longer term” down 0.4% in trend terms, while food retailing came out as the top performer.
There were falls in household goods retailing which includes electronic goods, furniture, hardware (-1.5%), cafes, restaurants (-0.9%) and clothing, footwear in August.
Mining boom state WA continues to drive the retail trade (1.4%), with the ACT (1.2%) also ploughing ahead of NSW (0.1%), SA (0.2%), while Vic (-0.1%), Tas (-0.7%) and the NT (-0.1%) all saw negative retail growth.
The news comes as the RBA slashed cash rates by .25 basis points to 3.25 per cent, on Tuesday, meaning interest rates are at a three year low.
So are consumers going to start spending like its 1999 again? Unlikely.
The Interest rate cut may “not necessarily” boost consumer spending…”it all depends on whether the ‘Big 4’ will pass on the cut,” says Choice spokesperson Ingrid Just.
The Australia Retail Association agrees with the consumer watchdog, saying any future growth in retail is dependant on banks passing on the rate cut .
“There is a need for banks to pass on the rate cut,” an ARA spokesperson told SmartHouse today, admitting there will “probably not” be any increase in consumer spending, otherwise.
None of the ‘Big 4’ Banks ie Westpac, CBA, Nab and ANZ have yet passed on the rate cut (BOQ did however) so bigger Christmas trading for retailers may be pie in the sky.
The Big 4 have been heavily criticised across the board for not passing on the rate cut to customers with PM Julia Gillard urging all banks to pass on the cut.
“I certainly believe that banks should be passing on the interest rate cut,” Ms Gillard said yesterday.
“But even if there is some cash freed up…consumers may choose to put that money into big ticket items like mortgage,” says Choice’s spokesperson.
“Consumers are spending like but not necessarily like they used to.They have a more savings mentality as there is bigger spend on bills which have all risen of late,” including electricity and the carbon tax may also impact on consumer prices.
Choice has also lambasted the major banks and believes their recent excuses about wholesale funding costs are a “distraction to rising profitability” of the hugely profitable financial insitutions.
“Over the last year we have seen the banking industry attempt to justify holding back rate cuts with complex references to wholesale funding”, said Choice CEO Alan Kirkland.
“As the RBA Governor has noted today, Australian banks ‘have had no difficulty accessing funding’, so this should not be used as an excuse.”
Retailers are happy about the cut but are looking for another one prior to Christmas and many analysts believe the Reserve will play Santa once more before the holidays and slash rates again on Melbourne Cup Day.
But unless the banks pass it on, then anaemic growth figures like we’ve seen today from the ABS will be forthcoming.