No late retailing cheer
Shoppers have filled their Xmas stockings early: ANZ
Retailers shouldn’t be holding their breath for a late spending boom before Christmas because a spike in present purchases in November, fuelled by Black Friday sales, brought forward shopping activity and left many Christmas stockings full.
ANZ has argued in its latest economics insight report that non-food retail spending has been soft so far in December, suggesting that the Black Friday bounce in spending reflected a shift in the timing of spending rather than an overall increase in spending.
And even though there are still a few days left until Christmas Day, including a full weekend of shopping, ANZ data points to no last-minute boom in spending.
“Households have faced higher interest rates, higher tax payments through bracket creep and higher prices due to inflation over 2023. This has led to a fall in aggregate discretionary consumption as seen through national accounts data, retail sales and our ANZ-observed spending data,” ANZ senior economist Adelaide Timbrell said.
“There has also been a shift to discretionary services spending and away from goods, which has hit the retail sector disproportionately.”
This week, NAB said it believed consumers would be making forced changes to their spending intentions this Christmas, with six in 10 deciding to pull back on presents and holiday expenditures to counter the growing pressures on household budgets.
Most retailers book the bulk of their profits across Christmas, Boxing Day and the new year sales, and any collapse in that sales momentum heading into Christmas Day could result in some retailers struggling, or even collapsing.
“Annual growth in ANZ-observed spending for key nonfood retail categories was more negative in December than across the fourth quarter and the entire year in general,” Ms Timbrell said.
“This suggests spending has shifted into earlier periods, presumably due to longer discount windows in November.”
Ms Timbrell said the bank expected 2024 to be a year of “two halves” for households as those cost-of-living pressures that reared their heads in 2023 continued, but with the hope in the second half of the year of tax relief and possible reduction in interest rates.
“The first half of the year will continue the impacts of higher rates, inflation and bracket creep,” she said. “The second half will be characterised by tax cuts from July 1, potential other fiscal easing, lower inflation and a rate cut in the fourth quarter. This will offset some of the negative impacts on real household incomes seen through 2023.”
ANZ is forecasting some monetary easing over 2024 that will be fiscal in nature, first via tax cuts from July 1, followed by monetary policy easing late in the year, most likely at the November meeting of the RBA.