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Wet Spring dampens retail spending

Wet Spring dampens retail spending

2011-01-10 09:21:15



After a weak bounce in the month of November, retail trade for that month was still below its level in the month of August, the last month of winter.
The weakness no doubt owed a lot to the increases in interest rates in late 2009 and the first half of the year 2010, as well as to the rate rise in the month of November, which came as a surprise to many interest rate forecasters.
It is also likely to have been related to a decline in the flow of finance for housing, which bottomed out in the second quarter of the year 2010, because a change in demand for housing - particularly new housing - is often a precursor of a change in retail demand.
But there is probably more to it than that.
On Monday, the Australian Bureau of Statistics (ABS) reported retail turnover increased by 0.3 per cent, seasonally adjusted, in November.
That followed a tiny increase of 0.1 %in the month of September and a fall of 0.8 % in the month of October.
By the month November, despite the rise, turnover was still down by 0.4 % from August.
Retail demand was undoubtedly soggy in the spring of 2010.
And that may have been partly because Australia was unusually soggy during three months as well.
According to the Bureau of Meteorology, it was the wettest spring, Australia-wide, for over 100 years.
And the return of so-called La Nina conditions last year meant average temperatures in Spring were the lowest since 1992, a downward blip more typical of the cooler 1950s than the hotter temperatures seen more often these days.
Cool, wet weather keeps many people away from the shops and depresses demand for seasonal goods, like summer fashions.
It is not possible to estimate exactly the total effect of the recent aberrant weather - which continued after November.
But at the very least the conclusion that the flat patch in retail spending has been entirely due to standard economic factors, like tighter monetary policy or a downturn in the housing cycle, ought to be taken with a grain of salt.