Economy may be swayed by Xmas shoppers

(Australian Associated Press)


Christmas shopping hordes will play a big part in whether the economy slipped into recession in the final months of 2016, economists say.

Retail sales rose 0.2 per cent to $25.66 billion in November, according to the latest figures from the Australian Bureau of Statistics, weaker than market expectations of a rise of 0.4 per cent.

Sales of clothing, food and household goods were stronger in the month, while department stores and cafe, restaurant and takeaway sales fell.

November’s modest sales rise follows growth of around 0.6 per cent in each of the previous three months.

If retail sales rose even moderately in December, that is likely to have been enough to signal a rebound in household consumption in the fourth quarter of 2016, Capital Economics chief economist Paul Dales said.

Weak spending in the third quarter contributed to that period’s 0.5 per cent economic contraction.

“All told, any improvement in household spending would be welcome given the outright fall in real GDP in the third quarter,” Mr Dales said.

“And it would provide more hope that Australia avoided its first recession in 25 years in the fourth quarter. But equally the economy is hardly firing on all cylinders.”

Citi economist Paul Brennan said the weaker than expected November figures will mean an even sharper focus on December retail figures, which will be released on February 6.

While the RBA is focused on non-mining business investment and the media’s attention is trained on the housing market, consumer spending will prove much more important in determining any surprises in economic growth in 2017, he said.

“This is not only because it is by far the largest component of GDP, but because the resilience of the consumer will be tested by interest rates being less supportive of spending this year and there are a number of fiscal consolidation measures that should impact household income,” Mr Brennan said.

“Momentum in household demand indicators is already soft.”


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